Key Drivers of Crypto Adoption in Latin America
Latin Americans are increasingly turning to Bitcoin and stablecoins to shield themselves from inflation. According to IMF data, inflation rates in Brazil, Peru, Chile, Mexico, and Colombia surpassed 12% in July, the highest in 25 years.
A recent study highlights three primary factors influencing the adoption of cryptocurrencies in the region: hedging against inflation, facilitating remittances, and pursuing higher returns through diversification.
The Role of Crypto in Remittances
Remittances, a crucial financial flow in Latin America, have increasingly shifted toward cryptocurrency. In 2022, the official remittance sector is projected to reach $150 billion. For instance, El Salvador’s government-backed payment platform Chivo facilitated $52 million in Bitcoin transfers from January to May 2022, while crypto services processed billions in remittances to Mexico.
Fighting Inflation with Digital Assets
Inflation in South America’s five largest economies—Brazil, Chile, Colombia, Mexico, and Peru—reached 8% in April, a 15-year high, and climbed to 12.1% by August, a 25-year peak. In nations like Venezuela and Argentina, the situation is even more severe, with inflation rates of 114% and 79%, respectively.
Stablecoins, pegged to fiat currencies like the USD, have become popular in inflation-stricken regions. Bitcoin, while not yet a proven hedge against inflation, remains widely used. Recent Mastercard research shows nearly one-third of Latin American consumers now use stablecoins for daily transactions.
Exploring High Returns
In the more developed South American nations, many cryptocurrency users are leveraging Bitcoin and other digital assets for speculative purposes rather than simply as a store of value. The top five Latin American economies rank highly in decentralized finance (DeFi) adoption, suggesting a significant focus on activities like lending, staking, and trading via decentralized protocols.
The region’s DeFi-driven markets resemble those in Western Europe and North America, where participants favor high-yield, decentralized platforms over centralized, savings-oriented services. Brazil leads in DeFi adoption, with speculative investments dominating its crypto market.
Thomaz Fortes, head of crypto at Nubank, one of the world’s largest digital financial platforms, noted that customers primarily view crypto as a speculative asset to increase income. Nubank, in collaboration with Polygon, plans to launch its own cryptocurrency, Nucoin, further enhancing the ecosystem.
