September 5, 2020
Many Latin American businesses use crypto to buy retail goods, while other citizens strive to evade unbalanced fiat markets.
The COVID-19 pandemic has slowed down the number of cryptocurrency transactions in Latin America. Factually, it was shown in a blockchain analysis that the total cryptocurrency value transferred from the region has increased since March, its most considerable portion going to East Asia.
Chainalysis, blockchain analytics has recently published research that shows how unbanked businesses and citizens in Latin America are using cryptocurrency as a means of trade, a supply of value, and a speculative investment. All in all, the firm found that the region’s unproductive banking systems are the main driver in cryptocurrency assumption.
Traditionally, some remittances in fiat currency to Latin America came from the US, mostly from itinerant workers sending funds to their families at home. However, with cryptocurrency transactions, Latin America has strong links to East Asia, existing with transactions between the two worth more than $1 billion, though there are fewer overall transactions.
Chainalysis found that many of the payments arefrom Latin American businesses buying goods from Asian exporters to trade at home.
To explain further, Luis Pomata, the co-founder of Paraguay-based exchange Cripex, stated that cryptocurrency makes it easier for businesses to evade expensive wire transfers and the import fees charged by regional banks.
But it’s not just the businesses. Individuals are also finding it problematic to work with traditional banks, which are, in turn, driving more cryptocurrency adoption.
SatoshiTango’s manager of Chilean operations, Sebastian Villanueva, indicated that many individuals in Latin America who have an uneven income from gig work also transition to cryptocurrency is stress-free than applying for a bank account.
Cryptocurrency is being considered by the Latin Americans to be a better store of value than the national currencies. It was shown in the report that “the amount of P2P [cryptocurrency] trading volume in many Latin American countries rises as native currency depreciates.”
It has a data supported by Statista, and it shows that the region of Latin America had the third-highest inflation rate of any part in 2019 (7.1%) following the Middle East (8.5%) and Sub-Saharan Africa (8.4%), with the mainstream of this inflation that comes from the hyperinflation of the Venezuelan bolivar and the Argentine peso.
Finally, the findings show a slow-growth region that accelerates cryptocurrency use chiefly for wealth buildup and commercial exchange.