The Crypto Industry Thrives in Latin America and the Caribbean
A recent joint report by the University of Cambridge and the Inter-American Development Bank reveals that while the global north has been hit hard by the bear market, the crypto industry in Latin America and the Caribbean (LAC) has experienced significant growth from 2020 to 2022. The report, titled “Cryptoasset Ecosystem in Latin America and the Caribbean,” surveyed 80 private enterprises and public sector institutions between June and August last year.
The report analyzed data from the Cambridge Fintech Ecosystem Atlas, which showed that there were 175 crypto companies in the region in 2022, with 100 of them headquartered or incorporated in LAC. This demonstrates that the crypto industry in LAC has more than doubled since 2016.
Changing Motivations for Investors
According to the report, investor motivations have shifted over the years. Prior to 2020, speculation was the primary driver, with investors focused on profiting from rising asset prices. However, current motivations include hedging against inflation and devaluation, as well as remittances and cross-border payments.
Brazil, Argentina, and Mexico Lead in Crypto Companies
The research highlighted Brazil, Argentina, and Mexico as the countries hosting the largest number of crypto companies in LAC. Brazil leads in all three main market segments: exchanges (74%), digital payment companies (41%), and crypto custody solutions (27%).
Regulation Hinders Growth
Regulation emerged as a key hindrance to further development of the crypto industry in LAC. Respondents identified it as the top challenge preventing a larger and more mature ecosystem. According to Andrés Junge, co-founder of Notabene, a crypto compliance company, the region’s regulatory environment is more lenient compared to its northern hemisphere counterparts, limiting access to crypto for the masses.
Optimism for the Future
Despite the challenges, industry experts like Romina Sejas, who organizes ETHLatam and ETHKipu, see growth and strength in the local industry. Sejas believes that Latin America can serve as a “stress test” for the crypto industry before going global. She also notes the push from Web3 builders to professionalize the industry and expand beyond their niche.
While new companies may be hesitant to enter crypto during the ongoing bear market, Junge observes increasing interest from traditional financial institutions seeking to enter the space. This indicates a potential shift in the landscape as more established players recognize the value of cryptocurrencies.
Hot Take: Crypto Thrives in Latin America and the Caribbean Amidst Global Market Slump
The University of Cambridge and Inter-American Development Bank’s joint report reveals that while crypto markets in the global north face challenges, Latin America and the Caribbean have experienced significant growth. The region has seen a doubling of crypto companies since 2016, with Brazil, Argentina, and Mexico leading in various market segments. However, regulatory hurdles remain a major obstacle to further development. Despite this, industry insiders remain optimistic about the future of crypto in LAC, citing growing talent and efforts to professionalize the industry. While new companies may be cautious about entering the market, traditional financial institutions are increasingly looking to enter the crypto space.
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