Cryptocurrencies in Latin America have great potential. Although 2019 will not be the best year for the continent in macroeconomic terms, its growth potential remains latent.
The rise of innovation hubs, as seen in Chile, and rampant entrepreneurship in countries such as Colombia, can shed some light about the place that these nations will occupy in the new Knowledge Economy.
Bitcoin and blockchain technology have found a promising ally in the lands of South America.
Although it is very difficult to determine precisely how many people use cryptocurrencies, we have some useful data to analyse this aspect:
Cryptocurrencies in Latin America seems to be here to stay. Brazil, Colombia, Mexico, Argentina, and Chile (in that order) dot the list in the continent, with an average of 15% of those interviewed claiming to have or have traded with cryptocurrencies at some time.
Another global survey on crypto asset ownership estimates that 5% of internet users worldwide (219 million people) own cryptocurrencies.
Latin America is clearly above the world average.
Another qualitative indicator is seen in the number of blockchain events and seminars that occur frequently.
An example is the Blockchain Summit Latam, one of the leading congresses held in the region. Bitcaribe attended its latest edition, in Mexico City, and share with its community some highlights of the event.
The disruptive power of cryptocurrencies in Latin America lies mainly in six factors:
Bitcoin is based on the decentralization of trust and allows free transactionality over the internet, without intermediaries or censorship. Besides, the emission of new bitcoins is controlled by its source code, keeping inflation levels at bay.
About 45% of Latin Americans (306 million people) do not have a bank account. Access to credit is also minimal (in an upcoming post, we will talk about the main credit tools based on blockchain). This leaves many in a situation of vulnerability and excludes them from the Economy, limiting the possibilities of growth and social advancement.
When a government devalue its currency or boost inflation through the inorganic issuance of money, the population is severely affected. Unfortunately, in Latin America we have two current and extreme examples that reflect it: Venezuela, with an uncontrollable hyperinflation level of more than 2,000,000% and Argentina, with its unstable and susceptible currency, which in just one day devaluated by 7,5%. In this scenario, some believe that Bitcoin might emulate the role of gold, but in a digital environment.
In Latin America, many depend on the money sent by their relatives abroad. Bitcoin is the currency of the internet; it moves freely between any country, and the commissions are meager. According to the World Bank, Latin America and the Caribbean received more than $88,000 million in remittances during 2018.
The fact of not having absolute control over your money exposes you to the solvency and guarantees of a third party. Sometimes, due to external factors or ineffectiveness, savers are victims of massive losses. It happened during the Argentine Corralito, the Financial Crisis in Ecuador of 1999 or the Banking Crisis of Uruguay of 2002. Bitcoin allows people to hold total control of their funds and decides what, how, and where to spend their money.
So far this year, Bitcoin has outperformed other assets (bonds, gold, stocks, and real state), reaching a YTD of 94%, at the time of publication of this article. The opposite side to this argument is the great volatility it experiences. A reality that still keeps many investors skeptical.
Do you think there is another factor that is worth noting? Let us know in the comments.
In 2019, the Caribbean economy, in terms of Gross Domestic Product, will far exceed the estimates for Latin America:
Concerning the blockchain ecosystem, there have been good news. For example, the launch of a digital version of the Eastern Caribbean Dollar (national currency in 7 States) has already been announced.
Bitcaribe has its focus in both regions.
We believe that the crypto market prospects are positive for the upcoming years.
We invite you to know our roadmap of products and services that are aimed at individuals as well as businesses and investors.