How Crypto Serves as a Lifeline for Latin Americans

Crypto-native features, such as stablecoins pegged to the dollar but free from capital controls and the need for traditional banks as intermediaries, are becoming invaluable in preserving wealth in the developing economies of Latin America. Moreover, initiatives to long-term invest or trade cryptocurrencies like Bitcoin, Ethereum, Matic, and others are gaining traction across the region.

High inflation in Argentina leads to people increasingly considering a stablecoin-based economy.  Following the devaluation in August 2023, peer-to-peer crypto exchange markets have witnessed remarkable growth, with cryptocurrency volumes increasing by up to 500%. Source: Crytponomist

Argentina's Growing Crypto Adoption in Daily Life

In Argentina, the adoption of cryptocurrencies in everyday life is on the rise, and it's not difficult to understand why. With soaring inflation rates bordering on hyperinflation, Argentinians are turning to cryptocurrencies as a haven for their savings. They are increasingly embracing stablecoins to safeguard their purchasing power and shield themselves from the constant devaluation of the national currency, which has been undergoing a steady erosion for decades, with the past couple of years witnessing an unprecedented devaluation.

A decade ago, 1 USD was worth 10 Argentine pesos. The peso (AR$) continued to weaken, and by October 2023, 1 USD is worth 1000 Argentine pesos. 

The historical rate performance is depicted by the blue line, representing the evolution of the free dollar's price in the unregulated, informal market, which reflects the true value. The institutional dollar has a lower price, but citizens of Argentina have limited access to it, with a cap of USD 200 per month, due to capital control rules. Source: Estudio Del Amo

According to Chainalisys’ 2023 Global Crypto Adoption Index Argentina and Mexico share similar positions in crypto adoption (15th and 16th) below Brazil (9th). However, Argentina drives most of its adoption through the informal economy due to the prevalence of unregulated financial markets and the unbanked population. As the report clearly remarks, the circumstances driving adoption in each country are unique, which leads to different usage trends of the most popular crypto services. 

Given the prolonged economic challenges Argentina has faced without any foreseeable improvements, it is not surprising that Argentina demonstrates much higher crypto adoption rates than Chile. Source: Chainalisys’ 2023 Global Crypto Adoption Index

When comparing Argentina's macroeconomic situation to countries like Venezuela, Bolivia, and Colombia, it is evident that these nations face similar economic pressures, although Argentina remains the richest amid crazy inflation. In contrast, Uruguay and Chile maintain a track record of more stable financial environments. The primary differences between these countries revolve around access to credit and price stability.

Argentina is poorly ranked in the region, in access to Credit scores compared to Chile at the highest position. Source: Buenos Aires Times

In global rankings, Argentina’s crypto adoption aligns closely with Turkey, while in the regional context, it shares similarities with Mexico.

Crypto is the light at the end of the tunnel

Talented developers and entrepreneurs are increasingly onboarding their efforts to the Web3 space to help build the value layer of the internet. Furthermore, many Latinos not directly involved in the crypto industry are looking to cryptocurrencies as a means of surviving economic hardships in Latin American economies.

The future holds both challenges and excitement to unfold in the coming years for Latin America and its charming people!