Latin America’s Crypto Landscape: The Latest Report by Chainalysis
Latin America, a region often overlooked in cryptocurrencies, has quietly become a global powerhouse in the crypto economy. Chainalysis, a blockchain analytics firm, has revealed that Latin America boasts the seventh-largest crypto economy globally, ranking ahead of Sub-Saharan Africa and not far behind regions like the Middle East and North America (MENA), Eastern Asia, and Eastern Europe. This remarkable position has remained relatively stable over the past two years.
Our latest Geography of Cryptocurrency preview is here! This time, we’re looking at crypto adoption and usage trends in Latin America. https://t.co/XNJZ7IrZpS
What sets Latin America apart from other regions is its strong inclination towards centralised exchanges, unlike the global trend favouring decentralised exchanges. Chainalysis’ report highlights that Latin America exhibits the highest preference for centralised exchanges among all the regions they studied. Additionally, it leans slightly away from institutional crypto activity compared to other parts of the world.
Grassroots Adoption
Latin America has a relatively small crypto economy by transaction volume, but the technology nonetheless supports a diversity of use cases throughout the region. We see evidence of this on the heat map below, which compares countries in the region by crypto platform preference. pic.twitter.com/FphawaGvGo
While Latin America may not have the largest crypto economy, its grassroots adoption is robust. Notably, three Latin American nations—Brazil (ninth overall), Argentina (15th), and Mexico (16th)—hold positions in the top 20 of Chainalysis’ Global Crypto Adoption Index. Cryptocurrency has become integral to daily life in many countries, especially those facing severe currency devaluation.
Unique Crypto Usage Patterns
Within Latin America, there is considerable variation in crypto usage patterns among countries. Centralised exchanges dominate the crypto transaction volume in almost every country, with Venezuela standing as an exception, where a staggering 92.5% of crypto activity flows through centralised services. In contrast, Mexico aligns more closely with global averages, with nearly half of all crypto volume being processed through decentralised exchanges (DEXes). This divergence likely explains Mexico’s inclination towards altcoins, as DEXes offer more assets than their centralised counterparts.
Mexico’s Crypto Remittance Market
Mexico emerged as a critical player in the realm of cryptocurrency-based remittances. It is the world’s second-largest recipient of remittances, with an estimated $61 billion flowing into the country annually, primarily from the United States. Mexican exchange Bitso’s CEO, Daniel Vogel, reported processing over $3.3 billion in crypto remittances from the U.S. to Mexico in 2022, accounting for 5.4% of the total market. The industry is closely watching to see if this share continues to rise for Mexico and other Latin American countries with substantial remittance markets.
Brazil’s Crypto Landscape
Brazil presents an intriguing case within Latin America. In previous reports, Brazil’s crypto market was characterised by a well-developed institutional sector and a strong embrace of DeFi and innovative crypto platforms, aligning it more with wealthier regions like North America and Western Europe. However, recent data indicates a shift, with significant institutional transfers declining and contributing to an overall dip in crypto activity.
Nonetheless, there are positive signs for Brazil’s crypto enthusiasts. Large institutional transactions have rebounded, showing three consecutive months of growth through June. Moreover, even during declining institutional transfers, the volumes of professional and retail-sized transactions have remained relatively stable.
The Resilience of Brazil’s Crypto Market
The data portrays an optimistic outlook for Brazil’s crypto market. Even in challenging market conditions, the “middle class” of high-value crypto traders and primary retail users have remained committed to the asset class. If this trend continues, there is potential for Brazil’s institutional users to return and possibly surpass their previous activity levels in a future positive market cycle.
We also take a deep dive on two countries. First, we look at Argentina, where we see evidence residents are embracing crypto to preserve their savings in the face of currency devaluation. We also spoke to @lemonapp_ar Head of Compliance Alfonso Martel Seward for more info. pic.twitter.com/dFRQwsBOJ7
Long plagued by economic turmoil and currency devaluation, Argentina has experienced a significant surge in cryptocurrency adoption. The Argentinian peso depreciated by approximately 51.6% in value in the year leading up to July 2023, intensifying the need for alternative financial solutions.
Alfonso Martel Seward, Head of Compliance & AML at Argentina-based cryptocurrency exchange Lemon Cash, shed light on the driving force behind Argentinian cryptocurrency adoption. He attributed it to the cryptocurrency’s role as a refuge against the devaluation of the Argentinian peso. The country’s high inflation rate and restrictions on purchasing foreign currencies have made crypto an attractive option for savings. Stablecoins, in particular, have gained popularity, serving as a new way to meet the demand for the U.S. dollar.
Crypto’s Impact on the Argentinian Economy
The data illustrates how crypto has been a lifeline for Argentinians during times of currency devaluation. As the Argentinian peso steadily lost value, crypto purchases surged, especially in mid-April, coinciding with the country’s inflation crossing 100% for the first time in three decades.
Lemon Cash has played a crucial role in addressing the challenges faced by Argentinians in their daily commerce. The exchange offers a debit card that allows users to access their crypto accounts for retailer purchases, instantly converting crypto into the local currency upon swiping the card. This innovation has propelled Lemon Cash to a leadership position in Argentina’s thriving cryptocurrency market.
Venezuela’s Crypto as a Tool Against Authoritarianism
Next, we look at Venezuela. Venezuela also faces currency devaluation problems crypto can help mitigate. But the country is also ruled by an authoritarian regime. We spoke to opposition leader @leopoldolopez to learn about the positive role crypto can play there.
Venezuela, another Latin American nation grappling with economic difficulties and currency devaluation, faces an additional challenge—an authoritarian government under Nicolás Maduro. Human rights abuses, political repression, and government corruption have marred the regime.
Leopoldo López, an influential Venezuelan opposition leader, has embraced cryptocurrency as a tool for change. López, the founder of the Venezuelan political party Voluntad Popular, believes that cryptocurrency has helped many Venezuelans preserve their savings amid the hyperinflation crisis, with rates exceeding one million percent.
Crypto has also facilitated remittances to Venezuela, a critical lifeline for the country amid a massive exodus of its population. Stablecoins have emerged as a practical alternative for fulfilling this need.
Cryptocurrency as a Tool of Resistance
One unique use case for cryptocurrency in Venezuela is its role in enabling citizens to resist the oppressive Maduro regime. López recounted a remarkable example during the COVID-19 crisis in 2020 when cryptocurrency was used to deliver direct aid to doctors and nurses in the country. This initiative overcame the regime’s control over traditional financial institutions, ensuring vital funds reached the intended recipients.
López told us about how cryptocurrency can help activists bypass financial controls of authoritarian regimes, and shared an example of how opposition leaders abroad used crypto to fund doctors and nurses in Venezuela during the Covid crisis.
López emphasised that cryptocurrency has become a vital tool for democracy activists, NGOs, and freedom fighters in Venezuela and worldwide. It provides an alternative means to overcome censorship and restrictions on civic space. However, he underscored that the true potential of cryptocurrency in supporting democracy movements will be realised when off-ramping into fiat currencies becomes independent of autocratic regimes.
Conclusion
The stories of Argentina and Venezuela illustrate the unique utility of cryptocurrency in Latin America. While each country faces distinct economic and political challenges, crypto has emerged as a lifeline against currency devaluation and a tool for resistance. These cases serve as a compelling reminder of the transformative power of cryptocurrency in regions that need financial stability and freedom.
