Latin America has a symbiotic relationship with Bitcoin. There is perhaps no region that has navigated this sector with such curiosity and intrigue. However, in much of the West, LATAM’s actions and behaviors often get ignored or brushed aside. Therefore, many people are unaware of what this collection of countries has been doing in relation to Bitcoin. Let’s shed some light on this and see what Bitcoin adoption in LATAM currently looks like.
The Current State of Bitcoin Adoption in Latin America
Bitcoin adoption in LATAM is not as straightforward as people might think. The region is made up of 21 countries, all of which have differing perspectives, governments, and laws regarding Bitcoin. Therefore, there is no one unified voice to speak for them all. However, what we can say is that overall, the sentiment towards Bitcoin is positive.
For instance, a 2023 report by ChainAnalysis found that Latin America has a good relationship with crypto, with many countries embracing it with open arms. In particular, Argentina and Venezuela were shining examples of adoption by citizens (regardless of BTC’s legal status). For what it’s worth, these countries also revealed a high interest in altcoins like USDT and USDC. Other countries like Brazil, Mexico, and Columbia have also shown extreme interest in Bitcoin and crypto, with many citizens holding and trading them.
Of course, another huge example of adoption in LATAM is when El Salvador elevated Bitcoin to legal tender status. By enshrining it in law, they displayed what might be the most powerful sign of acceptance that can possibly be given. Considering Bitcoin started out as an underground outlier to the traditional financial world, the fact that it became a country’s legitimate currency is an astronomical feat.
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Why Latin America is Embracing Bitcoin
There is a huge level of demand for Bitcoin in Latin America, but motivations for this are multi-faceted. The variety of countries within Latin America means that there can be no one reason, but rather a collection. Let’s take a look at some of these possible drivers.
Hedging Against Inflation
Bitcoin is often discussed as a potential hedge against inflation when it comes to the US dollar, but for some Latin American currencies, this takes on a whole new meaning. A notorious example of this is Venezuela, where hyperinflation has ensued, but Argentina and Brazil have also faced issues of the sort.
If the value of your fiat is depreciating, it makes sense to look elsewhere for stores of value. This not only explains why Bitcoin might be favoured by many people, but also why Bitcoin savings or growth accounts are often used, as these add an extra level of stability and financial security due to the interest you can build.
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De-Dollarization
Latin America has a complicated relationship with North America. In many ways, it relies on the US for financial purposes, but in a similar vein, it also gets exploited by them. This tenuous situation is well-known in government, and is also understood by many citizens within LATAM.
When it comes to financial reliance, the most pertinent example of this is how some countries have chosen to adopt the US dollar as their own legal tender. Ecuador, El Salvador, and Panama all did this at some point in their history. Even some countries that did not give USD this status use it very regularly (both for professional and social reasons). For instance, in Mexico, Costa Rica, the Dominican Republic, and Guatemala the US dollar is commonly used.
This is known as dollarization, which is where a country adopts the US dollar significantly into its existence and lifestyle. There are degrees to dollarization, with the extreme being where USD officially becomes the country’s own currency, and a softer version being where it is unofficially accepted as the de facto standard.
USD functions as a decent hedge against inflation in relation to many of these country’s own currencies, but with it often comes a level of disdain and frustration. As mentioned, Latin America is highly conscious of the unfair (and sometimes nefarious) ways the US gets involved with this region, and so they know that dollarization allows North America to have further control.
As a response, there has been a huge, decades-long, push to reduce the prominence of the US dollar in such areas, referred to as de-dollarization. Bitcoin has arguably become a tool in aiding this goal, as it serves as a means of not only hedging against inflation, but also allowing people to use a currency that is not tied to any specific country. It offers financial freedom, but this time on an international and even governmental level.
Therefore, governments embracing Bitcoin helps them significantly by unbinding themselves from USD. The most extreme case of this is El Salvador’s adoption of Bitcoin as legal tender, as it helps to dilute the dollar’s significance.
Acceptance of Non-Native Currencies
In the West, it is sometimes hard to imagine using Bitcoin as a typical currency because we already have our own currencies which are tightly bound to their nations. For instance, US citizens don’t often consider buying something via anything other than USD, or British citizens might see it as unfathomable or simply weird to engage in remittance with anything but GBP. However, in Latin America it is much more common.
Other currencies are used to hedge against inflation, and in some highly dollarized countries using a foreign currency is the norm (as was both mentioned earlier). The fact that people grow up and live in nations like this means that there is much less of a mental barrier when it comes to engaging with non-native currencies. This perspective, on a psychological and social level, is extremely useful as it essentially sets a foundation for using Bitcoin. It makes Bitcoin-related activity seem less daunting and more acceptable.
Not only is that the case for citizens within LATAM, but the fact that dollarization exists in much of the region means that governments and regulators are already used to managing finances when they do not control the origin or mint. In places like the US, there is sometimes a fear that embracing Bitcoin means losing power, but in Latin America they are already somewhat used to this type of activity. Therefore, protocols exist for it, and the desire for granular control is less present.
Key Players in Latin America's Bitcoin Ecosystem
Let’s take a look at some of the key players relating to Bitcoin adoption in LATAM. These are the figures and institutions that have made a significant impact on how Bitcoin is handled and perceived within the region.
Nayib Bukele– Nayib Bukele is the current President of El Salvador, and one of the most outspoken politicians when it comes to Bitcoin’s adoption. He was the figure who instigated the country to accept it as legal tender. He claimed that it would increase economic stability and allow more people to access financial tools, as the country was struggling with fiat operations and banking, especially when it came to its citizens. His adoption of Bitcoin did not exactly trigger a wave of other countries following suit, but it did cause much of Latin America to heavily consider it, and sparked many economic and political debates.
Bitso– The international crypto exchange, Bitso, serves as one of the largest crypto exchanges operating within Latin America. The company does not function in every country, but it does work with Argentina, Brazil, Mexico, and Colombia. This makes it extremely important as several of these countries have some of the largest documented crypto userbases in LATAM.
LABITCONF– LABITCONF is the biggest and one of the longest-running Bitcoin and blockchain conferences in Latin America. This yearly event is a celebration and critique of where the industry is currently at, and a hub for thought-leaders and investors to congregate and share ideas. It is regularly filled with taste-makers in the crypto space, meaning it holds a significant place as being one of the great center points for discourse relating to LATAM and Bitcoin.
Bitcoin's Real-World Applications and Use Cases in Latin America
These are some of the real world applications that have influenced Bitcoin adoption in LATAM.
Remittance: Remittance, the act of simply transacting money, is by far the simplest and most significant use case for Bitcoin in LATAM. This is especially true in countries that struggle with inflation (and especially with hyperinflation), as well as nations where fiat banking is hard to secure. The ability to send BTC to anybody without needing an intermediary, coupled with the knowledge that while the asset might fluctuate significantly it has historically always recovered, is a huge benefit.
Investment: Many people in Latin America are using Bitcoin as a way of long-term investment. Some do this by simply holding it in a wallet, whereas others use dedicated Bitcoin savings or growth accounts, such as those offered by Ledn. For the latter, these are fantastic as they can build interest in a hands-off way.
Hedging Against Inflation: Closely tied with the notion of saving money, many people hold BTC as a hedge against inflation for their native currency. This is particularly important when it comes to countries like Venezuela and Argentina, which are notorious for these issues. However, even countries that have the US dollar as their primary legal tender are not immune to inflation concerns. In fact, since the COVID pandemic, there has been a looming question about whether USD is on the precipice of severe inflationary issues.
Trading: Just like the rest of the world, Latin American individuals partake in crypto trading, meaning they are actively buying and selling BTC with other currencies (both fiat and crypto).
Accessing Loans: In countries where people are often underbanked or lack credit history, citizens may struggle to access loans. This is a huge issue, as loans are sometimes needed to provide financial security and help with cash flow issues. For this reason, people may turn to Bitcoin loans.
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The Challenges and Risks of Bitcoin in Latin America
There are several risks and concerns that Latin American individuals should be privy to before they start engaging with Bitcoin.
Regulation Concerns
Each Latin American country handles Bitcoin regulations differently, and while there appears to be unity in the sense that the citizens of most of these nations are actively involved in the space, there is very little alignment on a governmental level. For instance, on one side of the spectrum, you’ve got El Salvador which has elevated BTC to legal tender status, whereas on the other end you’ve got Bolivia which has banned Bitcoin.
This means you need to actively look into your country’s status on the asset, and not only check if they are positive about it, but also see if there are looming questions about it being banned in the future.
Platform Insolvency
Platform insolvency and bankruptcy is an issue that can present itself in any country, especially considering how many services work internationally. However, it is important to keep this in mind because you should ensure that your country has the right regulatory provisions in place, just in case a platform does fall apart and it takes your assets with it. Because if your country is not prepared to manage those issues then it might be worth questioning whether you want to start using BTC anyway.
Fiat-to-Crypto Gateways
In many Latin American countries, people use Bitcoin because it is easier to access on a regular basis compared to fiat. However, for these places, there will be an especially complicated hurdle at the beginning, where you may want a reliable fiat on-ramp.
In the past, LocalBitcoins was one of the most popular services in LATAM because it had many different options for accessing BTC, some of which were relatively unconventional, such as swapping gift cards or other valuables. However, in February 2023, it closed its doors due to global regulatory pressures. Nowadays, it is best to look into what options are popular in your region, as there will be much variety across LATAM.
Future Prospects of Bitcoin in Latin America
Latin America’s future is always up for debate, as this collection of countries shares an unbelievably rich and complex history. This is true on practically every metric, including geopolitics, native histories, wealth, and culture. For this reason, it is extremely hard to predict what will come of it. However, in terms of Bitcoin, here are some possibilities worth being mindful of.
Further Legal Tender Adoption
When El Salvador elevated Bitcoin to being legal tender, people expected other Latin American nations to follow suit, but this never happened. There was much discourse about other countries doing the same thing, and this discourse has persisted to the current day, but so far it has not materialized.
It is reasonable to make the argument that other countries are taking a “wait and see” approach, monitoring El Salvador and observing whether it has been a smart idea by them. There are certainly other areas that are actively discussing it, such as Panama and Paraguay, who are highly invested in this idea. Therefore, interest has not exactly died down.
Bitcoin as a Store of Wealth
Many parts of Latin America are tremendously wealthy, but for internal political, geopolitical, and colonial reasons they have been compromised to the point of being unable to have that wealth materialize. This is particularly the case when looking at how much oil exists in this region. Venezuela is a major example of this, as it has some of the largest oil reserves in the world.
In the past, Venezuela tried to create a cryptocurrency that was pegged to the wealth of its own oil, but this project failed for several reasons. However, it indicates that the region is actively experimenting with using crypto as a means of helping with its wealth management. Plus, considering there is growing environmental concerns with non-renewable energies, some countries that typically rely on oil to bring money into the area might consider alternatives like Bitcoin as a way of storing their wealth or helping them out financially.
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Further Division regarding Bitcoin
LATAM is not a unified space like the EU; it does not have an infrastructure set up to collectively regulate it. Therefore, a lot of mixed opinions exist regarding many topics, including Bitcoin. A safe prediction for the future would be to expect an increase in diverse opinions to emerge. We might see more legal tender discussions, but we might also see more bans. LATAM tends to be very varied in its activity.
Conclusion
Bitcoin Adoption in LATAM is at a great place overall. Not only has one country accepted it as legal tender, others are debating it, and on top of this the general public is highly receptive to it. This should mean it is poised to become an even bigger player in the crypto space in the coming years.
However, much like all parts of LATAM, it may not be this simple. In a similar vein, there are crackdowns on Bitcoin mining and crypto activity in some countries, and so it is possible that these regulations strangle activity and slow it down. In reality, we are likely to see some countries embrace BTC with open arms, and others treat it as the plague. Therefore, it will be extremely fascinating to watch and see what comes of it, and how the actions of some countries in the area affect perspectives and legal behaviors in others.
Disclaimers
This article is sponsored by 21 Technologies Inc. and/or its subsidiaries (“Ledn”) and is for general information, discussion, or educational purposes only and is not to be construed or relied upon as constituting legal, financial, investment, accounting, tax, estate-planning, or other professional advice or recommendation. Please read Ledn’s full Risk Disclosure Statement and Disclaimers.
