Payments Driving Crypto Adoption in Latin America
The 40% growth in crypto adoption in Latin American countries over the past year was largely driven by remittances.
Residents of these countries received $562 billion in crypto payments between July 2021 and June 2022, according to Chainalysis data. According to their latest report, remittances were a driving factor behind this growth. In the face of ongoing inflation, many also used stablecoins to preserve value as local currencies fell in value.
Remittance payments increase international crypto flows
Remittance payments have been a common feature of Latin American economies for some time. Workers who earn higher wages abroad will often send a significant amount home to support their families there. The formal remittance market totaled approximately $150 billion this year.
While the spread of crypto-based transfers has not occurred evenly across the region, where it has it has been rapid. For example in El Salvador, where the government introduced Bitcoin as legal tender last year. To facilitate the use of cryptocurrency, the government encouraged the use of its official Chivo wallet. Between January and May of this year, the system processed $52 million in Bitcoin remittances.
Meanwhile, Mexico has seen billions in crypto-based remittance payments over the past year. As of June this year, Mexico’s largest crypto exchange, Bitso, facilitated $1 billion in payments from the United States. This represents about 4% of the $51.6 billion remittance market in the country, and a 400% year-on-year increase.
Inflation hedge against Latin American currencies
Like Middle Eastern economies struggling with inflation, Latin Americans have been using crypto to store value. The currencies of Argentina and Venezuela in particular have been in crisis over the past year. In the former, year-on-year inflation has reached 79%, while in the latter it is as high as 114%. This means that the value of these currencies has fallen by about half since last year.
Consequently, citizens of these countries have flocked to stablecoins to keep some of the value behind their money. US dollar-pegged stablecoins, including USDT, USDC and USDD have proven particularly popular in Argentina, due to the current strength of their base currency. As a digital currency, stablecoins are also easy to use for anyone. Recent Mastercards data showed that a third of consumers in Latin America make purchases with stablecoins on a daily basis.
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