Written by: Chainalysis
Compiled by: Aiying Aiying Team
The global economic landscape is changing as Web3 and encryption technologies advance rapidly, and Latin America presents significant growth potential and unique challenges in the process. It is against the background of this wave of globalization and decentralization that Aiying hopes to use this Chainalysis report analysis to provide inspiration for the industry and inspire practitioners to think deeply and explore the Latin American market. Of course, similar reports have been done before ([Research Report] In-depth Analysis of the Latin American Cryptocurrency Market in 2024: Detailed Interpretation from Legalization in El Salvador and Brazil to Regional Innovation).
1. Overview of the Latin American Cryptocurrency Market
Latin America accounts for 9.1% of total global cryptocurrency receipts between July 2023 and June 2024, according to the report.
During this time, the region received approximately $415 billion in cryptocurrencies, a figure slightly higher than East Asia.
In Latin America, centralized exchanges (CEXs) are the most popular cryptocurrency services, with 68.7% of trades conducted through these platforms, slightly lower than the usage of centralized exchanges in North America.
In terms of trading volume, cryptocurrency trading in Latin America is mainly driven by institutions and professional investors (i.e. entities with trading volumes exceeding $10,000).
This year, Latin America is the second fastest growing region so far in the report, with year-over-year growth of approximately 42.5%.
The growth came mainly from strong but distinct cryptocurrency markets in countries such as Venezuela, Argentina and Brazil. Argentina was the country with the highest cryptocurrency value in the region, at about $91.1 billion, slightly ahead of Brazil at $90.3 billion.
In Chainalysis’ Global Cryptocurrency Adoption Index, four Latin American countries are in the top 20: Brazil (9th), Mexico (13th), Venezuela (14th), and Argentina (15th). This will be discussed in detail in the following content. Stablecoin-based remittance business is gradually gaining widespread attention and application in these countries and throughout Latin America.
2. Brazil’s institutional crypto activity recovers, and financial giants return to the crypto market
According to the report, Brazil’s crypto market has experienced significant volatility over the past year, from a sluggish state in early 2023 to a strong rebound in the middle of the year, showing that institutional investor interest is picking up. The report notes that the global cryptocurrency bear market in early 2023 resulted in a significant decline in institutional trading volumes in Brazil; however, this trend was reversed mid-year as market sentiment shifted, with institutional trading activity rapidly increasing. Data show that large institutional transactions with an amount of more than $1 million increased by 29.2% between the last two quarters of 2023, and between the fourth quarter of 2023 and the first quarter of 2024, this growth further expanded to 48.4% %.
According to the report, one of the reasons driving this recovery is the diversification of investment portfolios. André Portilho, head of digital assets at BTG Pactual Investment Bank, analyzed that "As the market matures, investors are increasingly incorporating digital assets into their asset allocation, viewing them as an alternative investment option that can provide high returns. Bitcoin and other cryptocurrencies are gradually being recognized as mature investment tools, which is crucial to attracting new capital inflows. In addition, the recovery of the Brazilian crypto market has also been driven by the improvement of the regulatory environment and the entry of US institutions, especially the launch of Bitcoin and Ethereum ETFs, which has greatly boosted investor confidence."
Aaron Stanley, founder of Brazil Crypto Report, observed from the perspective of the overall development of the industry: "Brazil's crypto ecosystem has matured over the past year. Several traditional financial institutions, including Itaú, Brazil's largest bank, have launched cryptocurrency brokerage services, and other major banks are actively developing similar products. At the same time, major global crypto exchanges such as OKX and Coinbase have also expanded significantly in Brazil, establishing local teams to provide customized services for the Brazilian market. In addition, the pilot project of the hybrid central bank digital currency (CBDC) developed by the Central Bank of Brazil and the smart contract platform Drex has further promoted traditional financial institutions to adopt a more active strategy in the field of digital assets. All of this has undoubtedly promoted the popularity of cryptocurrencies among institutional and retail investors."
Against this backdrop, Brazilian cryptocurrency investors have shown particular interest in certain assets. Report data shows that Bitcoin’s trading volume surged between September 2023 and March 2024, and this increase may be directly related to the January 2024 approval of a Bitcoin spot ETF by the U.S. Securities and Exchange Commission (SEC). During this period, the price of Bitcoin almost doubled, which also played a significant role in the increase in trading volume.
Additionally, the report shows that Brazilian investors trade much more Bitcoin on global exchanges than on local exchanges.
However, there are clear differences in asset types on local exchanges. Data shows that the trading volume of stablecoins has increased by 207.7% year-on-year, far exceeding Bitcoin, Ethereum and other altcoins. In this regard, Stanley explained: "Many local exchanges and fintech companies offer customers stablecoins pegged to the US dollar as a means of storing value. This strategy does attract a considerable number of customers, but for now, the main use of stablecoins seems to be concentrated in the field of B2B cross-border payments."
Stablecoins now account for about 70% of indirect flows from local Brazilian exchanges to global exchanges. The report pointed out that Brazil's high interest in stablecoins and other digital assets, as well as its widespread acceptance of digital services, have also attracted the attention of major crypto companies including Circle. Circle announced its official entry into the Brazilian market in May 2024. A spokesperson for Circle said: "We chose to enter Brazil at this moment because the regulatory environment here is becoming clearer. The government has implemented policies that support innovation, and more business-friendly regulations may be introduced in the future. We are working with leading local companies to launch digital asset products, providing Brazilian users with instant, low-cost, 24-hour USDC services, while strengthening our local business coverage. Due to this strategic commitment, the number of USDC users has grown rapidly."
However, Brazil's cryptocurrency market still faces many challenges in its future development. The report mentioned that Aaron Stanley pointed out that the macroeconomic environment is one of the biggest obstacles at present: "Economic growth has slowed, the exchange rate of the Brazilian real (BRL) against the US dollar has depreciated sharply, concerns about increased taxes have always existed, and middle-class families are heavily in debt. Overall, Brazilian consumers' disposable income is far below market expectations." Despite this, regulators are open to cryptocurrencies, which lays the foundation for future growth. "Regulators view encryption technology as a tool that can be effectively used, rather than a threat that must be suppressed. As long as a regulatory framework that is widely recognized by the market can be established, Brazil's crypto economy will have the opportunity for stable growth in the next few years." Stanley concluded.
3. Stablecoins provide a stable path for Argentina’s long-term economic turmoil
According to the report, Argentina's decades-long struggle with inflation and the devaluation of the Argentine Peso (ARS) has left many citizens searching for alternatives to protect their savings and ensure a more stable economic future. The report states that the economic situation in Argentina in 2023 was particularly turbulent. By the second half of 2023, inflation was as high as about 143%, the value of the Argentine Peso had fallen sharply, and 40% of Argentines lived below the poverty line. In December 2023, newly elected President Javier Milei announced that the peso would be devalued by 50%, calling it a "shock therapy", while the government would cut energy and transportation subsidies.
In response to the economic crisis, some Argentines have turned to the black market to buy foreign currency, most commonly the U.S. dollar (USD). These so-called "blue dollars" are dollars traded at an informal parallel exchange rate, usually obtained through underground exchange points "cuevas" throughout the country. In addition, more and more Argentines are turning to stablecoins pegged to the U.S. dollar to protect their financial situation.
According to the report, we looked at the monthly stablecoin trading volume in ARS on Bitso, the leading exchange in Latin America, and found that the continuous decline in the value of the peso has always triggered an increase in stablecoin trading volume. For example, when the peso fell below $0.004 in July 2023, stablecoin trading volume surged to more than $1 million the following month. Similarly, when the peso fell below $0.002 in December 2023, the same month that President Milley announced his policy, stablecoin trading volume exceeded $10 million the following month.
The report further pointed out that Argentina’s stablecoin market is in a leading position in Latin America. Argentina’s stablecoin transaction volume accounts for 61.8%, slightly higher than Brazil’s 59.8% and much higher than the global average of 44.7%.
Additionally, the report shows that retail stablecoin transaction volume (i.e., transactions below $10,000) in Argentina has grown faster than any other asset type, again suggesting that Argentines see stablecoins as a means to mitigate the effects of inflation and currency devaluation. Their interest in stablecoins highlights the role of cryptocurrencies in volatile markets and how citizens can take greater control of their financial future by embracing cryptocurrencies, regardless of official monetary policy.
4. Cryptocurrency’s strong growth in Venezuela despite uncertainty caused by Maduro regime
According to the report, despite the uncertainty caused by the turmoil of the Maduro regime, Venezuela's cryptocurrency adoption rate remains strong. Venezuela's relationship with cryptocurrencies has been full of twists and turns, from the launch of the state-backed Petro (PTR) in 2018 to its abrupt termination in 2024 - a stablecoin designed to be backed by Venezuela's oil and mineral resources, to the crackdown on Bitcoin mining and the blocking of access to major crypto exchanges, all of which reflect the complexity of the country's crypto journey. At the same time, the Maduro regime has attempted to circumvent economic sanctions through cryptocurrencies, and its illegal oil trade has also become entangled with crypto transactions, ultimately leading to a high-profile prosecution by the US Department of Justice. These crypto-related events reveal a broader shift, with the Maduro regime using cryptocurrencies for corruption and ordinary people seeing them as a means to ensure financial independence.
Despite the turmoil, the Maduro regime has recently shown a renewed interest in cryptocurrencies, though it has yet to offer concrete plans. Regardless of how these political developments ultimately play out, Venezuela remains one of the fastest-growing crypto markets in Latin America. Reports show Venezuela’s year-over-year growth rate at 110% far exceeds any other country in the region.
What’s driving this growth? First, the report states that Venezuelans are drawn to cryptocurrencies as a response to the plummeting value of the bolivar (VES). Data confirms this, as ordinary Venezuelans continue to seek a stable store of value to hedge against the impact of the country’s economic crisis.
The report further states that DeFi (decentralized finance) is another aspect of cryptocurrency growth in Venezuela. Since 2022, centralized services have accounted for the majority of the cryptocurrency value received in the country. However, interest in DeFi gradually grew, especially towards the end of 2023. While centralized services are currently still the most popular, the growth of DeFi market share is an area to watch in the future, especially if the growth of DeFi is likely to accelerate further if the Maduro regime explicitly supports crypto innovation.
Cryptocurrency activity accelerates in the Caribbean, despite uncertainty following FTX bankruptcy
According to the report, since the FTX bankruptcy, the Caribbean cryptocurrency ecosystem has experienced a period of uncertainty and slowed activity, and user trust in crypto platforms has gradually weakened. However, since the end of 2023, cryptocurrency activity in the Caribbean has seen a recovery. Data shows that users seem to be turning back to mainstream centralized exchanges (CEX) such as Coinbase and Binance.
David Templeman, a professional financial investigator at the Cayman Islands Financial Investigation Bureau, was contacted to better understand the changes in cryptocurrency activities in the Caribbean. Templeman pointed out that in the Cayman Islands in particular, the number of overseas clients seeking to establish Web3 and blockchain-related legal entities has increased significantly in the past year, while this trend was not obvious in previous years. These projects usually involve Layer 1 or Layer 2 and have a wide range of applications, ranging from artificial intelligence, cross-chain infrastructure, games to data and cloud storage.
Templeman concluded: “The series of collapses (FTX, TerraUSD/Luna, Celsius Network, and Three Arrows Capital) has put pressure on the industry to learn from its mistakes and establish better oversight and protections. There is a strong community of blockchain and Web3 companies physically and legally established in the Cayman Islands.” Clearly, cryptocurrency activity is booming again in the Caribbean, solidifying the region’s position as a key hub for cryptocurrency adoption in the coming years.
