Cryptocurrency adoption in Latin America is on the rise, accounting for 9.1% of the global crypto value received in 2022 and totaling $562 billion from July 2021 to June 2022. This massive surge can be partially attributed to regulatory developments and institutional adoption. Authorities in the region are actively working on central bank digital currencies (CBDCs) and refining regulatory frameworks, bringing stability and clarity to the crypto landscape.
Latin American companies are also exploring blockchain technology’s potential to address regional challenges. Notably, Mercado Bitcoin issued Brazil’s first stablecoin, MBRL, in partnership with Stellar. Colombia plans to introduce its digital currency to enhance transparency and combat tax evasion, while cities in Argentina accept cryptocurrencies for tax payments to combat inflation.
In what follows, we take a closer look at the key factors driving Latin America to the forefront of cryptocurrency adoption.
Storing value against inflation
Inflation has become a driving force behind the increasing adoption of cryptocurrencies in Latin America. In Argentina, where the inflation rate stood at 113.4% in July of 2023, cities like Buenos Aires and Mendoza have taken the progressive step of accepting cryptocurrencies for tax payments. Additionally, the Santa Fe Province is exploring crypto-mining activities to fund essential rail infrastructure upgrades.
Meanwhile, Venezuela, grappling with an alarming year-on-year inflation rate of 115%, has witnessed an astronomic rise in crypto adoption. Its national currency, the Bolivar, has depreciated by over 100,000% from 2014 to 2022. Amidst the unyielding inflation rates, Venezuelans have grown reliant on crypto as a store value. In 2022, for example, the country received $37.4 billion in cryptocurrency transactions, with 34% of these transactions involving stablecoins.
Tokenization has emerged as another significant catalyst for crypto adoption in the region. Countries like Brazil have advanced in their Central Bank Digital Currency (CBDC) project, focusing on “asset tokenization.” This innovation involves converting real estate, stocks, and commodities into digital representations, streamlining transfers and enhancing asset liquidity.
The tokenization of financial assets, including corporate bonds and real estate debts, has democratized investment opportunities, granting access to a broader audience. Latin America’s persistent issue of double-digit interest rates, driven by soaring inflation rates, has amplified the appeal of tokenized assets. Investors in search of predictable returns and reduced volatility have turned to this novel approach.
Beyond traditional finance, Latin America has also witnessed the tokenization of music and art, providing artists with greater international exposure.
Crypto casinos and pay-to-earn games
The past few years have seen the rise of crypto gaming, with crypto casinos and pay-to-earn games amassing a large following. In major crypto casinos, for example, users can try their luck at slots, poker, roulette, or play Bitcoin baccarat online. Transactions like deposits and earnings are carried out using a wide range of cryptocurrencies, including Ethereum, Litecoin, and Binance Coin.
Play-to-earn games, on the other hand, have surged in popularity in Venezuela, Brazil, and Argentina. Built on blockchain networks, the games allow players to invest in in-game NFTs (characters, skins, and special items) and then earn tokens by playing.
One standout title in this genre is Axie Infinity, where players collect and battle creatures represented as NFTs. Latin America now accounts for a quarter of all Axie Infinity users and ranks as the second-highest growth region.
Rising inflation, tokenization, and the popularization of crypto gaming have led to an unprecedented increase in cryptocurrency in several Latin American nations. Yet, crypto adoption in the region still faces significant risks and challenges. Vulnerable Latin American countries grapple with macroeconomic instability, widespread corruption, and informal economies. While regulatory frameworks are evolving, education and awareness of blockchain technology are still lacking. To conclude, as the landscape in Latin America continues growing and evolving, we can expect effective strategies to harness the potential benefits of crypto while mitigating risks.