Stablecoin usage in America is not what it used to be, according to Chainalysis. Despite record-breaking crypto activity this year, America is losing its grip on stablecoin transactions.
The decline began in February, reversing the upward trend that was consistent until 2023. Stablecoin activity has surged globally, especially in regions with emerging markets. Transactions on non-US-regulated platforms have taken off this year
Non-US markets lead the way
Circle, the issuer of USDC, points out that demand for dollar-backed assets is skyrocketing outside the US. Many of these countries lack stable local currencies, making the US dollar an attractive option, especially in places where people can’t easily get their hands on traditional banking systems.
“The Federal Reserve estimates that almost $1 trillion in US banknotes are held outside the US,” a Circle spokesperson said. That’s 45% of all US banknotes, and about two-thirds of $100 bills in circulation are abroad.
Without clear rules, stablecoin projects are flocking to places like Europe, where the Markets in Crypto-Assets Regulation (MiCA) came into effect in June.
MiCA gives these projects a legal foundation, something the US hasn’t managed to establish yet. If this continues, the US risks losing influence over the dollar’s role in global on-chain commerce.
Right now, other countries are setting the standard while the US drags its feet. The consequences could be huge. Remember Eurodollars?
US policymakers ignored that market in its early days, only for it to grow massively and solidify the dollar’s role internationally. History could repeat itself here.
Both political parties agree that the status quo is unacceptable. The big question is, will Congress step up?
There’s been some movement. In July 2023, the House Financial Services Committee advanced a stablecoin bill. It includes AML (Anti-Money Laundering), CFT (Counter-Terrorism Financing), and sanctions obligations for issuers—key to keeping US-based stablecoins globally relevant.
Latin America’s booming crypto scene
While the US struggles, Latin America is thriving. Stablecoin adoption is climbing in the region. From July 2023 to June this year, Latin America pulled in nearly $415 billion in crypto.
That’s 9.1% of the global market, placing it just above Eastern Asia. Centralized exchanges are leading the way, with 68.7% of the activity happening there.
Argentina leads in the region, bringing in $91.1 billion, slightly ahead of Brazil’s $90.3 billion. Stablecoin-based remittances are growing in these countries.
Brazil rebounded this year after a rocky 2023. Institutional investors are back in the game, with transactions over $1 million increasing by 29.2% between the last two quarters of 2023 and 48.4% between Q4 2023 and Q1 2024.
Bitcoin is particularly popular over there, with transaction values skyrocketing between September 2023 and March 2024. This uptick coincided with the SEC’s approval of spot Bitcoin ETFs.
Argentina, meanwhile, is struggling with runaway inflation. In the second half of 2023, inflation hit 143%, and the Argentine peso (ARS) continued to fall.
By December 2023, President Javier Milei announced a 50% devaluation of the ARS, a move dubbed “shock therapy.”
When the peso’s value fell below $0.004 in July 2023, stablecoin trading volumes surged, hitting over $1 million the next month. In December, when the ARS dropped further, stablecoin trading exceeded $10 million.
And then of course, Venezuela. The country’s relationship with crypto has been somewhat turbulent, from the failed launch of the state-backed petro (PTR) stablecoin to crackdowns on mining.
But crypto remains a lifeline for many Venezuelans battling the collapse of the bolívar (VES). Year-over-year growth stands at 110%, making it the fastest-growing crypto market in Latin America.
Meanwhile, the Caribbean is also having a comeback. After the collapse of FTX, the region’s crypto ecosystem went through a period of uncertainty. But right now, Chainalysis says centralized exchanges like Coinbase and Binance are seeing consistent, increased usage in the Caribbean.