As I’m sure you’re well aware, El Salvador just recently became the first country in the world to recognize Bitcoin as legal tender, and this caused the price of the crypto to jump 5%. The Bitcoin Law, as it’s named, was passed by a supermajority as 62 out of 84 lawmakers voted in favor of the cryptocurrency.
This law passing isn’t a fluke as Latin America as a whole has been deeply interested in cryptocurrency for several years now and I personally believe that something like this was an inevitability.
Statista Global Consumer Survey conducted a survey to see which countries use cryptocurrencies the most, and among those in Latin America, the highest users are Peru, Argentina, Chile, and Mexico. According to that survey, 16% of Peruvians invest in or use cryptocurrency, followed by Argentina at 14%, and Chile at 12%.
@Bitso one of the largest cryptocurrency exchanges in Latin America, raised a $255M Series C last month, Pantera (was an early backer), this puts the startup at a nearly $2.2B valuation, becoming the first crypto unicorn in LATAM. @tnatw @lamaason @faraz_m_gw pic.twitter.com/aWw9d8NBra
— Aimée 🌪🧘🏽♀️🔥 (@thecryptocoach) June 11, 2021
Bitso, Mexico’s premier cryptocurrency exchange, grew over 300% in 2020 and raised $250 million in 2021, so clearly, people are deeply interested.
This raises the question as to why cryptocurrencies are gaining so much traction in Latin America compared to everywhere else, and while there may be many things at play, the simplest answer is probably because of economic instability. The fact of the matter is that a lot of countries in Latin America have a poor economic performance which was made worse by the pandemic.
Many people are poor in these countries and rely heavily on remittances; in fact, remittances took up more than 20% of the GDP in El Salvador back in 2019.
Tying into instability issues, many people in these countries don’t have a bank account due to lack of access and being rejected for one. Digital banking via cryptocurrency allows people in Latin America to store their money in a secure account that is easily accessible and subject to sudden drops.
Fiat bags pic.twitter.com/tFPBEtKNID
— ₿itcoin Liotta ☣️🐝 (@BitcoinLiotta) June 12, 2021
It may seem strange to think of Bitcoin and cryptocurrency as “stable” due to their volatile nature, but compared to the economic instability these people have to deal with, crypto is rock steady. For example, take a look at Venezuela and its money issues. The cause of Venezuela’s money issues may be up to debate, but the results are not.
What the Future Holds
The President of El Salvador Nayib Bukele proposed this law as well as putting forth the idea of turning the country into a center for crypto mining and utilizing geothermal energy to do so. El Salvador and other Latin American countries are home to numerous volcanoes which can be used to power mining facilities.
I’ve just instructed the president of @LaGeoSV (our state-owned geothermal electric company), to put up a plan to offer facilities for #Bitcoin mining with very cheap, 100% clean, 100% renewable, 0 emissions energy from our volcanos 🌋
This is going to evolve fast! 🇸🇻 pic.twitter.com/1316DV4YwT
— Nayib Bukele 🇸🇻 (@nayibbukele) June 9, 2021
With regards to fintech, the region is experiencing an explosion of activity due to the high demand for it.
Cryptocurrencies were already popular prior to the pandemic, but the virus only served to kick things into high gear. People are anxious to start businesses and buy houses but are often excluded due to banks catering to the affluent.
The State of #Fintech in Emerging Markets 🌍
This report evaluates the state of fintech in Africa, Latin America and South Asia across three lenses:
🔹 Investment trends
🔹 Product and business model trends
🔹 Reach and inclusivity
— Luxembourg House of Financial Technology (@The_LHoFT) May 11, 2021
It’s hard to start accumulating money when no one gives you a chance. It’s like running with a weight tied to your leg. But cryptocurrency offers a way to run without that weight and play on a level playing field.
Cryptocurrency may be the start of something huge in that region followed by a fintech revolution.