Drivers of Crypto Adoption in Latin America in 2022

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Inflation, cross-border payments, asset tokenization and non-fungible tokens (NFTs) were among the main drivers of crypto adoption in Latin America in 2022, sources from the region told Cointelegraph, with exciting examples of progress in many countries.

Latin America accounted for 9.1% of the global crypto value received in 2022, reaching $562 billion between July 2021 and June 2022, representing a 40% growth over the period. Four Latin American countries ranked among the top crypto users in the latest Chainalysis Global Adoption Index.

Major developments have contributed to these results over the past 12 months. Authorities worked on central bank digital currencies (CBDCs), implemented standards for business operations, and clarified regulations. Meanwhile, many companies in Latin America have explored ways to use blockchain technology and digital assets to solve the various challenges facing countries in the region.

“The region abounds with opportunities for cryptocurrency adoption,” noted a spokesperson for cryptocurrency exchange Bitso, which operates in Brazil and Argentina, among other Central American countries, adding that :

“For Argentina and Colombia, the impacts of inflation have pushed many to use cryptocurrency. […] For Colombia, remittances are another important driver of adoption, surpassing even coal as a driver of dollar revenue in 2022 according to a report by Banco de Bogot.”Crypto Latam

Institutional adoption and regulatory developments paved the way for Mercado Bitcoin to issue Brazil’s first stablecoin, MBRL, which is individually backed by Brazil’s fiat currency through a partnership with Stellar. The country’s central bank plans for 2023 the test of its digital currency, and for 2024, its full distribution to more than 200 million people. Additionally, a recently approved bill will regulate virtual asset providers after years of discussions in Congress.

“Brazil has been a major player in the history of crypto-economy in Latin America for several reasons: institutional adoption, regulatory advances and mainstream buy-in. In this sense, the involvement of the public sector is inevitable – this represents an extremely positive development, which improves the crypto-active industry while providing greater security for investors,” noted Fabrcio Tota, Director of Mercado Bitcoin.

Colombia also plans to introduce its digital currency, aimed at increasing transparency and preventing tax evasion, which is said to represent almost 8% of the country’s gross domestic product. In Chile, the central bank delayed plans to issue the digital Chilean peso for further analysis of the benefits and risks.

To combat inflation in Argentina, cities like Buenos Aires and Mendonza have started accepting cryptocurrencies for tax payments. At the same time, the province of Santa Fe plans to implement crypto-mining activities to raise funds for the modernization of rail infrastructure. These moves could be timely given that Argentina’s inflation rate is expected to be 73.5% at the end of 2022, according to FocusEconomics panelists.

“Argentina is becoming a hub for bringing technology development and resources to Latin America from the rest of the world,” said Ryan Dennis, senior director of the Stellar Development Foundation. “This naturally translates to blockchain development with a large number of startups in the country and therefore an increasing number of developers and founders working together in blockchain and crypto.”

Tokenization

The Latam crypto space has also benefited from the tokenization of investment products, allowing many to access products that were previously only available to large investors. “The tokenization of digital assets has increased over the past few years,” including assets such as corporate bonds and real estate debt, Dennis noted.

High interest rates in the region are another reason contributing to the boom in tokenization of financial assets. Most Latin American countries have double-digit interest rates, prompting investors to seek assets with predictable and less volatile returns. This is an ideal scenario for financial companies working on tokenization and decentralized finance (DeFi) solutions.

The tokenization of music and art is also trending in Latin America. “A revolution that happened in Latin America gives artists a window into the world of Web3,” Dennis explained. “There are a lot of artists who have been able to come out of their local communities and their country to become internationally recognized. It’s huge.”

The challenges facing the crypto industry in the region are similar to those seen around the world: a lack of education on blockchain technology, insufficient regulation, and a lack of trust. “The companies and projects that lead crypto in Latin America in the next year will be the companies that thoughtfully respond to the need for greater transparency and trust,” the Bitso spokesperson noted.

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