Latin Americans Turn to Bitcoin as Local Fiat Currencies Plunge

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Latin Americans have embraced cryptocurrency as a store of value while their fiat currencies depreciate, a new report shows. Bitcoin adoption in the region is further driven by the lack of banking access and remittance needs.

Latin American Bitcoin Adoption

Blockchain data analytics firm Chainalysis released a new study of cryptocurrency usage in Latin American countries based on on-chain data and interviews with experts in the region last week. The study is part of the firm’s Geography of Cryptocurrency Report, due to be released this month. Cryptocurrency adoption in Latin America is driven by factors such as a lack of banking access, remittance needs, and the devaluation of local fiat currencies.

Sebastian Villanueva, who manages the Chile operations of crypto exchange Satoshitango, explained that the lack of banking access for individuals and businesses is a major drive for cryptocurrency adoption in Latin America. “Lots of people here have uneven income because they do gig work for Uber or places like that, which makes it hard for them to get a bank account,” he said, asserting:

Without easy banking access, many young people in Latin America turn to cryptocurrency as a means of storing value.

Many Latin Americans use stablecoins like DAI and USDC to lock in their savings, Villanueva noted. Chainalysis explained that a significant share of the stablecoin transfer volume in the region is from traders using fiat to buy bitcoin or stablecoins, like tether, from local exchanges or P2P exchanges, and then use those funds to trade on larger exchanges like Binance that provides more trading pairs and greater liquidity. “This is a common pattern not just in Latin America, but in other developing regions as well,” the firm noted.

“Currency instability is another factor driving cryptocurrency adoption in Latin America,” Chainalysis claims, noting that “the amount of P2P trading volume in many Latin American countries rises as native currency depreciates.” The firm elaborated:

The correlations, each of which is statistically significant, suggest that cryptocurrency users in Argentina, Uruguay, Colombia, and Chile in particular are turning to cryptocurrency as a means to store value when their native fiat currencies are losing value.

“Venezuela and Argentina especially are printing money like crazy, so their fiat currencies are losing value. That drives a lot of cryptocurrency adoption,” Villanueva continued. “Some countries, like Argentina, limit the amount of U.S. dollars citizens can buy per month, which further limits their options for secure savings and increases the need for cryptocurrency.”

Reiterating that worsening economic conditions and associated civil unrest are driving cryptocurrency adoption in Latin American countries, Villanueva further noted:

Last October in Chile, there were mass protests over education, healthcare, and overall economic conditions. Fiat pay platforms saw huge decreases in activity during that time, but we grew by about 35% … People just want a safe way to store money, and there are no gatekeepers in crypto.

Latin America also has a robust crypto trading scene, with Brazil in the lead in terms of the most cryptocurrency usage by on-chain volume. Venezuela is a distant second, but the country accounts for the third-highest number of transfers on Localbitcoins and Paxful, two of the most popular worldwide P2P exchanges, as news.Bitcoin.com recently reported.

The region has the second-highest share of retail crypto activity, defined as transfers of less than $10,000 worth of cryptocurrency. However, professional traders still account for roughly 80% of all volume transferred in a given month; they prefer using large international exchanges like Binance rather than local exchanges to access more trading pairs and greater liquidity. Overall, Latin American countries sent $25 billion worth of cryptocurrency and received $24 billion worth in the past year, representing between 5% and 9% of all cryptocurrency activity in any given month, Chainalysis detailed.

Representatives from Brazil-headquartered crypto hedge fund Hashdex told Chainalysis that “a desire for potential high yield assets with uncorrelated returns is driving cryptocurrency adoption amongst professional investors, such as those representing pension funds and family offices.”

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