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What is driving the growth of crypto in Latam? 10 takeaways from the Paxos report.

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Note: The original post on Medium can be seen here

Does crypto actually help the world? — It depends on what part of the world you ask.

We think that the answer lies in the continent that has the most retail use of cryptocurrency in the world — Latin America. There, Cryptocurrency is ushering in a new financial system.

This is really highlighted in the recent @PaxosGlobal report on What’s Driving the Growth of Digital Assets in Latin America. You can find the report here.

Our 10 takeaways

  1. As a continent Latam has the highest retail use of crypto, and growth of crypto use.
Some estimate that in 2021, the growth of cryptocurrency in Latin America in 2021 outpaced the rest of the world as a greater ratio of Brazilians — over 40%, tied with Indonesia — own more cryptocurrency than any other country in the world.

2. Crypto is a proxy for holding dollars — accessed through stablecoins.

Latin American citizens are already using cryptocurrencies like stablecoins, accessing U.S. dollars to offset local currency depreciation and as a hedge against endemic inflation.

3. History has created genuine skepticism/traumas towards banks and governments.

Many Latin Americans are cynical of centralized or government-backed institutions and the continued proliferation of devices like cell phones in underserved communities — is enabling internet access for previously disconnected or rurally located populations.

4. Mobile phone adoption is high in Latin America. This helps accessibility of blockchain for financial services.

Anyone with a cell phone can get access to the banking system and a cryptocurrency wallet today, which underscores the importance of educating people about cryptocurrency, digital wallets and stablecoins.

5. In 2021, there was a 600% increase in the use of crypto as a form of remittance (sending money abroad).

From July 2020 to May of 2021, the cryptocurrency value received by Latin America increased from under $10 billion to over $60 billion. Still, the dollar remains the most reliable hedge against Latin America’s own inflation challenges.

6. You thought inflation was high in the US? It’s much worse in Latin America.

The region is enduring the highest inflation in the world in 2021 and 2022 hovering around 12%, the highest inflation rate in 15 years. In Argentina, currency is so devalued that dollar inflation no longer matters.

7. The US Dollar still reigns supreme as a store of value.

People are reevaluating where they keep their money — and how to keep it safe.
Latin Americans favor the U.S. dollar as their preferred currency to preserve stable stored value for long-term purchasing power.
In 2013, Argentines held more than $50 billion in USD which amounts to more than 1 out of every 15 dollar-denominated cash assets in the world.

8. USD is also preferred as a currency for payment and remittances.

As of February 2020, the amount of transactions in dollars from all purchases stood at 64% in Venezuela.
In this way, cryptocurrency acts as a proxy for the U.S. dollar, offering some level of liquidity through the use of a cell phone without having to go to a bank, or worse yet — the black market, to get U.S. dollars at a discount.
Crypto is proving an attractive alternative to traditional banks’ foreign transaction fees and volatile exchange rates.

9. Crypto adoption is growing across all socioeconomic levels, but especially those that face more economic challenges.

All socioeconomic groups are contributing to cryptocurrency’s growth in Latin America.
The more challenges a country’s economy faces (e.g.,Venezuela) the larger the trend in crypto adoption, because they adopt out of necessity. Crypto might be a potential solution for troubled Latin America economies because it enables competition and reduces transaction costs.
Millions of refugees have fled dire economic and institutional conditions in Venezuela to Colombia; some of the seven million left behind in need of humanitarian assistance rely on crypto remittances for survival.
About half of Latin America and the Caribbean’s adult population are unbanked, but with cell phone penetration spurring internet access growth from 43% in 2012 to about 75% in 2021, those without traditional bank access increasingly have found a way into the system.

10. A crypto winter is not slowing down adoption of crypto in Latin America!

As of June 2022, 95% of Latin Americans surveyed by Mastercard said they are planning to use a digital payment method in the coming year, and 51% of Latin American consumers have already made a transaction with crypto assets.
Despite the forecasted crypto winter, cryptocurrency is forging ahead strongly, aided by the need for cheaper, faster and more efficient banking infrastructure. Instead of relying on traditional centralized banking entities, consumers can avoid the costly middleman.
Blockchain is creating financial connectivity for people who didn’t have it before, and is influencing the establishment of a new financial system. It is well-positioned to assume its place as the foundation of the global financial system in the Web3 era.

There are the 10 takeaways from the Paxos report on Growth of Digital Assets in Latin America!

I hope you found these highlights as insightful and interesting as we did. It goes to the very core of what why we are working on Decaf — to drive accessibility and utility of crypto! Particularly in Latin America — because as you can see there is a real need and it is where our team lives!

How do we do this?

By allowing users to:
1. Pay with crypto- through our Point of Sales (PoS).
2. Holding stable value (stablecoins like USDC in our digital wallet).
3. Remittances via on/off ramps to crypto in both our PoS (Cash<>crypto) and digital wallet (Card/Transfer <> Crypto).

Our mission to help drive financial inclusion through crypto. We do this by allowing easier payments, access to stable value, and fairer remittances — all through crypto. If you are interested in learning more reach out to our website Decaf.so or follow us on twitter at @Decaf_so.