According to a recent study, cryptocurrency adoption is on the rise in Latin America as users turn to digital assets to counter currency devaluations and inflation. A report from Chainalysis reveals that the region has seen a surge in adoption, driven by new use cases and an increased demand for centralized exchanges.
Latin America’s Growing Crypto Economy
The report highlights that Latin America is now the seventh-largest crypto economy, accounting for 7.3% of crypto values received between July 2022 and June 2023. While the region still lags behind Sub-Saharan Africa, it is not far behind Eastern Europe, Asia, and the Middle East. However, compared to major economies like Asia, the United States, and Europe, institutional investment in Latin America remains relatively low.
Nevertheless, the region demonstrates high rates of grassroots acceptance, with countries like Argentina, Mexico, and Brazil ranking among the top 20 globally in terms of individual usage. Many Latin American economies are leveraging cryptocurrencies for remittances and global payments, with Bitcoin and stablecoins being used as a hedge against inflation.
The Rise of Centralized Exchanges in Latin America
A noteworthy trend in Latin America is the preference for centralized exchanges (CEX) over institutional activity. The report notes that Latin America has the highest preference for CEXs among all regions studied. In Venezuela, CEXs account for 92.5% of trades, while decentralized exchanges (DEX) make up just 5.6%. Similarly, in Colombia, centralized exchanges handle 74% of transactions, while DEXs account for 21%.
Argentina stands out in terms of crypto adoption, particularly due to its economic troubles. With triple-digit inflation and imminent elections, the industry has become a central topic of discussion among presidential candidates. Some propose radical measures like abolishing the central bank and fiat currency, while others advocate for a Central Bank Digital Currency (CBDC) to combat economic challenges.
Despite the significant adoption of cryptocurrencies in Venezuela and Argentina, institutional investment and decentralized finance (DeFi) projects remain relatively low. Nonetheless, the demand for digital assets in Venezuela soared during the Covid-19 pandemic, as the government’s refusal to accept foreign aid led to increased reliance on virtual assets.
In conclusion, Latin America is experiencing a growing trend of cryptocurrency adoption, driven by the need to counter currency devaluations and inflation. The region’s high preference for centralized exchanges and the use of digital assets for remittances and global payments demonstrate the potential of cryptocurrencies in the region’s economic landscape.
