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Distrust of State-Backed Currency Seeds Crypto Adoption in Latin America

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Distrust of State-Backed Currency Seeds Crypto Adoption in Latin America

The crypto establishment is on the rise in parts of Latin America, where adoption looks set to pick up speed.

why is it important: The United States is the financial capital of the world. But there is a future in which crypto-adopts in Brazil and Argentina, for example, push the usefulness of digital assets further than consumers in developed countries.

  • An exchange with a billion dollars valuation is expanding and major financial institutions are reportedly rolling out new merchandise, saying people there are ready to embrace digital assets and platforms.

Drive the news: This week, heavyweight financial firms BTG Pactual and XP Inc. rolled out their own crypto platforms, called mynt and xtagerespectively.

  • Mastercard and Binance in early August spear a prepaid rewards card in Argentina to help increase crypto spending, and the payment company said in June that it would “secured“The crypto ecosystem of e-commerce giant Mercado Libre in Brazil.
  • Mexico-based crypto exchange Bitso in July reached 1 million users after only one year of service in the country. In addition, the Spanish banking giant Banco Santander is would have wade into crypto products and services.

The arrival of the crypto establishment in the pockets of Latin America shows the growth of the market there, which accounted for around 9% of all crypto transactions tracked by research firm Chainalysis between July 2020 and June 2021 (the most recent data available was published in October 2021).

be smart: Crypto adoption in emerging countries is proceeding very differently from that in developed countries and is seeded by retail customers rather than the big and affluent.

  • “In emerging markets, many are turning to cryptocurrency to preserve their savings against currency devaluation, send and receive remittances, and transact business,” Chainalysis’ 2021 report states.
  • “In North America, Western Europe and East Asia, by contrast, adoption over the past year has been driven largely by institutional investment.”

The big picture: In areas where a trifecta of factors – high inflation, political instability and out of reach traditional banking services – drive people to find alternatives to state-backed currency, crypto sung.

  • Kenya, Nigeria, Vietnam and Venezuela dominate web traffic for peer-to-peer crypto platforms, which serve as on-ramps to the crypto ecosystem in places where people don’t have access to centralized exchanges.

Concrete example: The instability of the Argentine peso has given rise to black market currency exchanges called tanks, highlighted in yesterday’s edition newsletter.

  • People who engage in these illegal currency exchanges have embraced crypto as a safer and cheaper way to move large amounts of cash across borders, avoiding government scrutiny.
  • Indeed, crypto, even when used indirectly, helps people on the ground to register – reinforcing the industry’s argument that digital assets could enable greater financial inclusion.

The other side: There are already concerns, however, that some aid organizations and private companies using crypto are doing more harm than good, and there is a term for them: the crypto-colonialists.

Another roadblock: According to Brazil’s central bank, crypto can only go as far as high-speed internet.

  • “The main challenges of financial inclusion in Brazil come from two sources: inadequate broadband coverage and financial illiteracy,” Fabio Araujo, project manager of the Digital Brazilian Real Initiative, said in a statement. April report on the country’s CBDC effort.

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