Since their inception in 2009, digital currencies led by front-runner Bitcoin have gone around the world in all directions, becoming one of the most popular and disruptive innovations of the past few decades. Naturally, some countries and regions were quicker to embrace this novel technology than others. In 2021, in a move that was as bold as it was controversial, El Salvador became the first country in the world to accept Bitcoin as an official currency alongside the US dollar.
Although Bitcoin’s integration into El Salvador’s economic system was nothing short of surprising, it highlighted a clear regional tendency. A similar predilection toward crypto adoption can be seen in other countries across Latin America, with digital currencies becoming important pawns in the local financial markets. Here, residents have a genuine interest in this new asset class and want to know how to buy crypto, whether it’s Bitcoin, Ethereum, or any other altcoin that could provide them with advantages that fiat money lacks.
At the same time, countries like China, Egypt, Indonesia, Morocco, have either taken a more cautious stance or have outright banned digital currencies in order to curtail the risks associated with these assets. This makes Latam’s growing love for crypto all the more intriguing and provides further reason to investigate this phenomenon.
The crypto market in Latin America in figures
Data from Chainalysis reveals that Latin America ranks seventh among the largest crypto economies globally, making up for 7.3% of the entire market. Although this means that Latam has a smaller crypto economy than other regions, it showcases strong grassroots adoption, having three countries included in Chainalysis’ top 20 Global Crypto Adoption Index, namely Brazil, which ranks ninth, Argentina, in the 15th position, and Mexico on 16.
Moreover, it is estimated that between mid-2022 and 2023, almost 50% of Latam residents in the region made a purchase using crypto. In most Latam countries, except for Mexico, the majority of crypto transactions go through centralized exchanges, while institutional participation is slightly lower than in other parts of the world.
It’s also noted that digital currencies are mostly used as a store of value in the region in the context of growing financial insecurities, excess inflation, and limited access to traditional financial services. However, there are significant variations in terms of usage, which we’re going to address below.
El Salvador’s trailblazing decision
On June 9, 2021, El Salvador made history when the country’s Legislative Assembly passed the Bitcoin Law and put Bitcoin (BTC) on par with the country’s other official currency, the US dollar. The decision was motivated by the need to enhance financial inclusion and boost the local economy, which was on a declining trend.
To mark El Salvador’s commitment to building a strong crypto economy, president Nayib Bukele launched the “1 Bitcoin per Day” program in November 2022, which involves the purchase of one coin daily starting March 2024 until it becomes unaffordable to do so. This has helped the country build an ever-growing Bitcoin reserve currently estimated at over $300 million.
Other initiatives meant to accelerate Bitcoin adoption include the Freedom Visa, a migration law under which foreigners can obtain citizenships by making Bitcoin donations, and an ambitious Bitcoin mining project which involves the use of geothermal power form El Salvador’s active volcanoes to facilitate the process.
Despite government’s efforts to encourage crypto adoption, Bitcoin use in the country has dropped significantly in 2023, with less than 12% of the population using the coin as a payment method, to purchase different goods and services.
Mexico
The aspect that sets Mexico apart from other Latam countries in terms of crypto adoption is the high number of crypto-based remittances. As the second-largest remittance receiver in the world, Mexico’s economic growth is considerably impacted by the approximately $61 billion flowing into the country each year from Mexican citizens working abroad.
In 2022, the Mexican exchange Bitso revealed it had processed crypto remittances worth over $3.3 billion, coming from the United States, accounting for 5.4% of the total market. As one of crypto’s strong suits is the ability to ensure faster and cheaper cross-border transactions, this is touted as a key factor that could support crypto acceptance in the country in the years to come.
Argentina
Argentina’s economy has turned into a real rollercoaster over the last decades, with periods of growth followed by sharp declines affecting the country’s ability to maintain financial stability. These past few years have been particularly difficult as the Argentine peso experienced a dramatic drop in value, hampering citizens’ efforts to save money or manage their budgets.
With the government-led peso devaluation and the yearly inflation rate reaching a whopping 290%, an increasing number of residents have been taking shelter in crypto assets. The fact that the purchase of foreign currencies is not encouraged by local policies has also encouraged this behavior.
Some say that having Javier Milei, an outspoken critic of Argentina’s central bank with a pro-crypto stance, win the presidential elections in November 2023 has played a part in the country’s rising crypto adoption.
Venezuela
Venezuela is another Latam country that has struggled with persistent financial issues and economic collapses that have led to high inflation and the devaluation of the local currency. To make matters worse, Venezuela is under President Maduro’s authoritarian regime, which has exacerbated the economic crisis and rendered all recovery efforts futile.
In these drastic conditions, crypto has become a tool that can help Venezuelans escape the clutches of the autocratic regime that tramples on their rights and keeps them in poverty. By acting as a store of value, citizens can use crypto to protect their savings and regain some control over their financial lives. If the financial situation in the country continues to deteriorate, it’s very likely that crypto use in Venezuela is going to increase.
The Latam crypto landscape continues to expand and develop, encouraged by struggling local economies and people’s desire to protect their assets, gain access to efficient financial services and have more control over their financial lives.