Changing the Lens on the Future of Crypto: LATAM’s Promising Future

It’s common for anyone who grew up in Latin America to marvel at magnitude, complexity and presentation when they travel to the US, Canada or Europe. The marked differences usually don’t lie on the quality of life, or, these days, in everyday technology, but on the average car on the street, the size and contents of the museums, the epic industrial and business centers. After all, the biggest international corporations are all headquartered in the northern part of the world. Since you don’t necessarily see wealth directly, you get a glimpse of the actual scope of the investments floating around through cultural venues, important facilities, transportation services or other material manifestations.

It comes to no surprise that a groundbreaking technology like blockchain and cryptocurrency quickly became part of that circuit. Crypto’s rapid evolution, global impact and explosive economic booms found no problem drawing interest from powerful investors, adventurous entrepreneurs and prestigious incubators. Mega corporations like Google and IBM have their own blockchain department and service providing infrastructure. Part of the technology’s attractiveness comes from the promise of a type of privacy and decentralization that makes the user the true owner of its data and digital assets, unlike most traditional softwares, services and online interactions (very few provide true decentralization). Today, blockchain is a billion dollar industry with a long list of implementation use cases across several fields and a dizzying curve of projected growth.

However, this scenario isn't 100% ideal. For one, centralizing growth and investments in North America and Europe has led to a limited exploration of blockchain’s vast potential, especially when it comes to mass adoption. The simple answer to this is that necessity breeds innovation, and the more realities the technology comes into contact with, the more challenges it will have to find solutions to. There’s also the danger that when you join a revolutionary tech with potentially unlimited resources, you get ambitious projects that are too big, too crazy or too far removed from everyday life to become other than unrealized niche dreams.

As this 2022 article points out, the focal point of crypto innovation is thankfully shifting, with LATAM becoming a key player. The widespread use of smartphones, lack of trust in certain governments or institutions, the fact that a sizable chunk of the population operates outside banks, and the need for safe, cheap ways to make payments, are a few of main factors that explain why. According to Rapyd, countries like Brazil and Mexico have seen remarkable growth in e-commerce and the adoption of digital wallets, internet-based text apps and nonbank payment services.

The continent’s social, political and geographical properties make it fertile ground for the adoption of new technologies. Economic instability and hyperinflation –in the case of Argentina and Venezuela, for example– have pushed citizens toward alternative financial solutions. The World Bank has indicated that LATAM countries receive billions in remittances annually, often through traditional banking channels that are costly and slow. Cryptocurrencies offer a faster, cheaper, and more secure method for transferring money, addressing a significant pain point for millions of people – especially if they have to send it across borders, as is the reality for many small businesses and families. Crypto circumvents restrictive capital controls.

Many Argentinians lack trust in their government and financial institutions due to a history of economic mismanagement and corruption. This distrust is intensified by tough currency controls, which make it difficult for citizens to access and trade in U.S. dollars, a common hedge against inflation​. Colombians, besides having low trust in financial institutions due to past crises and ongoing corruption issues, face high costs and complex procedures when accessing loans. The peso's volatility makes dollar transactions appealing, yet this involves navigating bureaucratic hurdles and unfavorable exchange rates. Mexicans also grapple with high loan interest rates and a fluctuating peso, driving demand for dollar accounts. However, this is often limited to wealthier citizens who can meet stringent banking requirements. Institutional distrust is fueled by corruption and inefficient governance, making financial stability a persistent concern.

This Americas Market Intelligence report confirms the claim that the region's financial challenges create opportunities for pioneering crypto applications. In the 2021 Chainalysis Global Crypto Adoption Index, four Latin American countries were among the top 20 ranked according to p2p exchange trade volumes and on-chain values received. On the flipside, even though Latin America represents one fifth of those 20 countries, the region doesn’t score high in DeFi usage. Not unexpected if you consider what I said previously, that adoption is dictated by its ability to meet everyday needs. LATAM users’ main concern lies in storing value, not in having access to DeFi applications.

One product that continues to thrive in the Latin American landscape is Mercado Pago, which was first created to complement the e-commerce platform MercadoLibre. Mercado Pago now offers various financial services, including payment processing, gateway services, mobile payments, and credit cards. In Brazil there’s PicPay, another digital payments app, which has over 60 million users and deals with BRL 6.8 billion in monthly transactions, equivalent to approximately $1.3 billion US dollars. In Colombia, everyday payments between individuals and businesses are facilitated by PSE, a mobile ACH service that allows people to make purchases and payments online by debiting their bank accounts. 

My personal experience both as participant and speaker in various LATAM-based tech events, like Web Summit in Rio de Janeiro and Blockchain Summit Latamin Bogotá, has only reassured me that the region has a bright future ahead. I’ve had the luck to encounter a vibrant community of developers, entrepreneurs, and enthusiasts working on next-level projects, with an adventurous yet down-to-earth attitude towards blockchain. Their energy and creativity reflect their capacity to lead in the crypto space, supplying the demand for decentralized solutions that succeed where traditional financial institutions fail.

Latin America's rise in the crypto and digital payment ecosystem is not just a trend but a testament to the region's resilience, proactive approach to problem solving and restless spirit. Those of us with roots in the continent should be able to marvel at our own accomplishments. Channeling more attention and resources toward it will not only do a lot of good for a lot of people, it will push the crypto/blockchain/web3 envelope to new yet practical horizons. This will undoubtedly have repercussions across the world and inspire others. It’s an exciting prospect!