Remittances are driving “uneven but rapid” crypto adoption in Latin America
Transfer payments, fiat fear and profit-seeking have been the top three drivers of crypto adoption in Latin America, according to a new report.
The seventh largest crypto market in the world saw the value of cryptocurrencies received by individuals rocket 40% between July 2021 and June 2022, reaching $562 billion, according to a report by Chainalysis on October 20.
Part of the increase was attributed to remittances, with the region’s total remittance market estimated to have reached $150 billion by 2022. Chainalysis noted that crypto-based service adoption was “uneven but rapid.”
The firm pointed to a Mexican exchange operating in the “world’s largest crypto transfer corridor” that processed over $1 billion in transfers between Mexico and the US in the year to June 2022 alone.
It marked a 400% year-on-year increase and accounted for 4% of the country’s remittance market.
However, the region’s soaring inflation rates have also played a big role in crypto adoption, according to the research firm, particularly in the use of US dollar-pegged stablecoins.
“Stablecoins – cryptocurrencies designed to remain pegged to the price of fiat currencies such as the USD – are a favorite in the most inflation-ravaged countries in the region,” the firm explained.
The region has been battling staggeringly high inflation rates, with an International Monetary Fund estimate revealing that inflation in the five largest Latin American countries hit a 25-year high in August at 12.1%.
This has led ordinary consumers, seeking to protect themselves against falling national currencies, to take and hold fixed coins to make their day-to-day purchases.
The report cited a June Mastercard survey that found over a third of consumers already use stablecoins to make daily purchases, while Chainalysis noted that residents from Venezuela, Argentina and Brazil were most likely to use stablecoins for small retail transactions (under $1,000).
Venezuela in particular has seen its national fiat currency the bolívar depreciate by over 100,000% since December 2014, the firm added.
Interestingly, the report found that citizens of the larger and more developed Latin American economies were also likely to adopt cryptocurrencies as a means of profit.
Related: Latin America is ready for crypto — Just integrate it with their payment systems
Chileans were the most involved in DeFi, with over 45% of all crypto transaction volume taking place on DeFi platforms followed by Brazil at just over 30%, Brazil was the number one country in the region for crypto value received approaching $150 billion.
“Latin America’s more DeFi-centric crypto markets are not unlike those of Western Europe or North America, where market participants are embracing cutting-edge, return-focused crypto platforms more than savings-centric centralized services,” explained Chainalysis.
