The 40% growth in crypto adoption by Latin American countries over the past year was largely driven by remittances.
Citizens of these countries received $562 billion in crypto payments between July 2021 and June 2022, according to Chainalysis data. According to their latest report, remittances were a driving factor behind this growth. Facing runaway inflation, many also used stablecoins to preserve value, as local currencies plummeted in value.
Remittance payments increasing International crypto flows
Remittance payments have been a common feature in Latin American economies for some time. Workers earning higher wages abroad will often send a significant portion home to support their family there. The formal remittance market amounted to roughly $150 billion this year.
While the proliferation of crypto-based remittances has not occurred evenly across the region, it has been swift where it has. For instance, in El Salvador, where the government introduced Bitcoin as legal tender last year. In order to facilitate the use of cryptocurrency, the government encouraged the use of its official Chivo wallet. Between January and May this year, the system processed $52 million in Bitcoin remittances.
Meanwhile, Mexico has seen billions in crypto-based remittance payments over the past year. As of June this year, Mexico’s largest crypto exchange, Bitso, facilitated $1 billion in payments from the United States. This represents some 4% of the $51.6 billion remittance market in the country, and a 400% increase year-on-year.
Inflation hedge against Latin American currencies
Similarly to economies in the Middle East struggling with inflation, Latin Americans have been using crypto to store value. The currencies of Argentina and Venezuela in particular have been in crisis over the past year. In the former, year-on-year inflation has reached 79%, while in the latter it is as high as 114%. This means that the value of these currencies has dropped by roughly half since last year.
Consequently, citizens of these countries have been flocking to stablecoins to retain some of the value behind their money. US dollar-pegged stablecoins, including USDT, USDC, and USDD have proven especially popular in Argentina, due to the current strength of their base currency. As a digital currency, stablecoins are also easy for anyone to use. Recent Mastercards data showed that a third of consumers in Latin America make purchases with stablecoins on a daily basis.
BeInCrypto has reached out to company or individual involved in the story to get an official statement about the recent developments, but it has yet to hear back.