Cryptocurrency Adoption Grows in Latin America as Users Seek Protection Against Inflation
A recent study conducted by Chainalysis reveals that cryptocurrency adoption is on the rise in Latin America, driven by users who are leveraging digital assets to protect themselves against currency devaluations and inflation.
The report highlights the growing adoption rate in the region, which has become the seventh-largest crypto economy, accounting for 7.3% of crypto values received between July 2022 and June 2023. Although it lags behind regions like Eastern Europe, Asia, and the Middle East, it surpasses Sub-Saharan Africa.
Latin American countries such as Argentina, Mexico, and Brazil are among the top 20 globally in terms of grassroots acceptance of cryptocurrencies. These economies utilize digital assets for remittances and global payments, with Bitcoin and stablecoins being popular choices to hedge against inflation.
Institutional investment in Latin America remains low compared to regions like Asia, the United States, and Europe. However, individual users are driving the growth of cryptocurrency adoption in the region. The report suggests that industry participants will be closely watching if institutional investment increases in the coming years, especially in countries like Mexico with large remittance markets.
Centralized Exchanges Prevail in Latin America
One noteworthy trend in Latin America is the preference for centralized exchanges (CEX) over decentralized exchanges (DEX). The region shows the highest preference for CEXs compared to other regions studied.
In Venezuela, CEXs account for 92.5% of trades, while DEX usage is only at 5.6%. Similarly, in Colombia, 74% of transactions are conducted through CEXs, while 21% are done through DEXs. These figures surpass the global averages for both CEX and DEX usage.
Argentina and Venezuela Lead the Way
This year, Argentina has seen a surge in cryptocurrency adoption due to its economic challenges. As the country grapples with triple-digit inflation, Presidential candidates have proposed using digital assets as a means to revive the economy. Some candidates advocate for radical measures like abolishing the central bank and fiat currency, while others push for a central bank digital currency (CBDC) to counter dollarization.
Venezuela experienced a similar uptick in digital asset adoption following the COVID-19 pandemic. The government’s refusal to accept foreign aid prompted donors and medical services to turn to virtual assets for assistance.
According to a report released by The Inter-American Development Bank (IDB) and the Cambridge Centre for Alternative Finance (CCAF), there has been significant growth in the crypto sectors across Latin American countries since 2016.
Hot Take: Cryptocurrency Adoption Soars in Latin America Amid Economic Challenges
Latin America is experiencing a surge in cryptocurrency adoption as individuals seek protection against currency devaluations and inflation. Countries like Argentina and Venezuela, facing economic woes, have turned to digital assets for solutions. The region has become a significant player in the crypto economy, with a growing number of users embracing cryptocurrencies for remittances and global payments. While centralized exchanges dominate the market in Latin America, there is potential for institutional investment to increase in the coming years. Overall, cryptocurrency adoption in Latin America is on an upward trajectory, signaling a shift towards a more decentralized financial future.
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