Citizens of Venezuela and Argentina have increasingly turned to cryptocurrencies as a financial lifeline.
High inflation rates and currency devaluation have propelled crypto to the forefront of daily transactions and savings preservation in these countries. This shift highlights a broader trend across Latin America, which ranks seventh in the global crypto economy, with significant adoption rates despite its smaller economic scale.
Venezuela’s shift to Crypto amid economic crisis
Venezuela’s severe economic conditions under President Nicolás Maduro have led to hyperinflation and the collapse of the local currency, the Bolívar. A report by Chainalysis indicates that a staggering 92.5% of the country’s cryptocurrency transactions occur through centralized exchanges.
Source: Chainlysis
The Venezuelan opposition leader, Leopoldo López, has pointed out the crucial role of cryptocurrencies in safeguarding the wealth of the populace, stating that stablecoins have become a critical defensive measure against hyperinflation, which has exceeded rates of 1 million percent.
Source: Chainlysis
During the COVID-19 pandemic, cryptocurrencies also provided a vital channel for financial aid. With President Maduro controlling the conventional banking systems, crypto payments enabled support for medical professionals, who otherwise faced meager monthly earnings between $3 and $5.
Argentina’s Crypto Dependence
Argentina’s economy has struggled with decades-long instability, with the peso declining by over 51.6% recently. Argentinians have adopted a strategy similar to Venezuela’s, heavily relying on stablecoins like USDT and USDC to convert their earnings and shield their financial stability from the impacts of devaluation. This trend intensified when the country’s inflation rate soared above 100%, a first in thirty years. As per Chainalysis, Argentina led Latin American countries in crypto transaction volume, totaling an estimated $85.4 billion.
Source: Chainalysis
Crypto growth in Brazil and Mexico
Beyond Venezuela and Argentina, other Latin American nations like Brazil and Mexico embrace cryptocurrencies, albeit with different preferences and intensities. Brazil, known for its robust engagement with decentralized finance, has seen consistent transaction volumes among professional and retail investors despite a dip in large institutional transfers.
Source: Chainalysis
In contrast, Mexico has seen significant growth in crypto-based remittances, mainly from the U.S. Daniel Vogel, CEO of Mexican exchange Bitso, noted that crypto remittances accounted for 5.4% of the country’s total, amounting to $3.3 billion in 2022.
Source: Chainalysis
While stablecoins are the preferred crypto asset in Venezuela and Argentina due to their economic conditions, Brazilians and Mexicans show a broader preference for Bitcoin and other altcoins, used both for trading and long-term investments. This diversification underscores the varying impact and integration of cryptocurrency across different economies in Latin America.
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