Cryptocurrency popularity is increasing around the world and Latin America is experiencing a boom on its use. The region accounts for 9% of the global transactions, according to the Chinalysis 2021 Report. Hence, to give you an overview of this scenario, we unraveled the details of this boom.
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Latin America: A growing market
Considering all crypto assets, the total value of the market surpassed USD 2 trillion as of September 2021 which represented a 10-fold increase since early 2020. This growing ecosystem has been driven by emerging countries, especially from Latin America.
A research from Statista shows that If we look at the percentage of users or owners of cryptocurrencies in each country, we will see that Argentina (21%), Colombia (15%), Chile (14%), Peru (13%) and Brazil (13%) have a greater crypto adoption compared to powerful economies such as the US (10%), Russia (8%), China (7%), Germany (7%) and Japan (4%).
Read also: Top Crypto Online Platforms in Latin America
It must be noticed that countries in LATAM differ about crypto use. Some of them use virtual currencies as a payment system or an investment system, and each of them has its own aspects. As it is shown below, Argentina is the country in LATAM with the highest percentage of crypto adoption, followed by Colombia and Chile.
Source: Statista Global Consumer Survey, January – June 2021
Finally, another example of this crypto boom in LATAM is the amount of VC funding happening in the region. Since individual users account for the majority of crypto users in LATAM (see the chart below), it becomes a great opportunity for online cryptocurrencies platforms.
Local startups have raised USD 517 million during the first half of 2021, according to a spokesperson from the Association for Private Capital Investment in Latin America (LAVCA) in an interview to CoinDesk.
The same spokesperson said: “in 2021, we saw a definite uptick in crypto investments in terms of volume and ticket size”. Thus, it can be understood why this boom favored local startups. From the nine new unicorns born in the first half of 2021 in LATAM, two are in the cryptocurrency segment – Bitso (a Mexican company which declares to have 95% crypto market share in Mexico) and Mercado Bitcoin (which is the largest crypto exchange in Brazil).
The reasons behind LATAM’s crypto popularity
Economic crisis and instabilities
Many countries in LATAM are experiencing an economic crisis and Latin Americans seek cryptocurrencies to protect their wealth. Since inflation rates are surging in the region, although crypto is a risky and volatile asset, it remains as a better alternative than holding national currencies which are losing value. There are also some places where the lack of faith in the government is contributing to this digital assets wave and storing money on a blockchain protects their wealth from devaluation or other risks.
Cryptocurrencies are an instrument of financial inclusion in the LATAM due to its lower-cost way of transferring funds. Since the region has about a half of its population unbanked, according to The World Bank, many people use alternative payment methods (APM) and other ways to protect their money, such as cryptocurrencies.
Another factor is that, due to the increased mobile phone penetration (it reaches over 100% in some markets in the region as stated by the World Bank) and internet use (387.2 million connected, according to Statista), reaching out the crypto market became much easier than having access to a bank account.
Digital Savvy Population
A study conducted by Pew Research Center showed that about a quarter of Latin Americans are below the age of 15, and 13% and 63% are 15-59 years old. Therefore, the adoption of cryptocurrency trends for this younger demographic.
Ana González Barrera of the Pew Research Center stated the following to Yahoo Finance: “Hispanics tend to have a higher share of technology use, especially mobile technology. This is because Hispanics are younger than other groups. That is why they are more likely to use technology.”
Latin America has definitely been one of the pushers of this global increase in cryptocurrencies adoption. Not only people, but also companies have been encouraged to use them when considering the advantages of digital assets. These advantages are becoming well known by the local population, and, as it was demonstrated in this article, cryptos support Latin Americans to overcome the institutional and economic barriers faced by many countries in the region.
The looping effect of increasing demand for crypto and emergence of local startups is booming the market. Nowadays, several mobile apps help Latin Americans become informed, store, and manage cryptos.
The evolution of payment methods in LATAM brought multiple benefits for this crypto penetration. In Ecuador, for example, some businesses accept cryptos with store owners advertising this service on their walls, and at the entrance of the shops. Another great example is El Salvador, which became the first country in the world to officially accept Bitcoin as legal tender.
Remember: the future of cryptocurrencies in LATAM is happening now and there are many players in this scenario that you must know!
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