Stablecoins Uptake Gains Steam to Shield Inflation in Latin America and Europe

Stablecoins uptake is navigating the turbulence witnessed in the crypto market and banking sector to realize an increased user base in Latin America and Europe.

Stablecoin Adoption Unaffected by Crypto Banking Crisis

A scrutiny of the stablecoin adoption shows widespread uptake worldwide despite the banking crisis and bearish steam taking a toll on digital assets. The crisis plunged some projects, such as USDC, to lose the dollar peg.

The chief executive of Argentina-based Belo crypto exchange, Manuel Beaudroit, admitted the steady rise of stablecoin utilization since 2019. The cofounder of the digital asset platform that today operates in over 130 countries restated that stablecoins account for over half of Bello’s trading volume.

Besides Argentina, Beaudroit revealed that El Salvador is the second largest market. The country’s prominence arises from the government-led support of Bitcoin as a legal tender.

The majority of the users in El Salvador often utilize the Belo platform when depositing bitcoin, subsequently swapped for tether-issued stablecoin USDT. The transaction usually leaves USDT as the largest stablecoin by transaction volume.

Stablecoin Gains Noticeable Market Share as Bitcoin and Altcoins Decline

Num Finance cofounder and chief executive Agustin Liserra lauds stablecoin for realizing increased market share growth as bitcoin and other altcoins’ dominance decline. The executive revealed that stablecoins utilization is on the rise. I

The Argentina-based entity official indicated the usage is increasing even in stablecoins issued pegged to developing countries currencies. Liserra echoed Beaudroit of Belo’s exchange views that stablecoin market participation and capitalization are growing despite the declining crypto activity amidst the prolonged bear period.

The adoption rates and reasons vary relative to the region. The increased activity of seasoned investors and traders in digital assets propels stablecoin uptake in developed economies. Contrastingly, Latin America’s spike in stablecoin utilization arises from devotion by Latin Americans to safeguard their money from accelerated inflation.

Stablecoin adoption in Europe reveals an increasing trend since the 2017 crypto winter. The adoption leverages the desire of traders and investors to protect their crypto investments from volatility. ATH21 chief executive Cristina Carrascosa observed that European traders embrace stablecoins for fear of losing their investment. The Spain-based specialist in blockchain technology observed that European investors embrace stablecoins as a means to speculate and facilitate DeFi protocols utilization to reap the returns.

Inflation Driving Crypto Enthusiasts into Stablecoins

Countries within Latin America are battling high inflation rates where 50% of the workforce is engaged within informal workplaces. The contingent of this population likely suffers financial exclusion from the banking system. 

 Beaudroit observed that a recent decision by Argentina’s central bank involved restricting the citizens from acquiring US dollars to safeguard its federal reserves. The move by the central bank pushes the citizens into acquiring the dollar-denominated stablecoin. 

The popularity of the stablecoin arises from the awareness that one can access dollars without owning a dollar-denominated account. Liserra observed that the uptake of stablecoins increases as people consider it a channel to dollarize savings. Besides, USDT, USDC, and DAI offer a friendly dollarizing process.

The review of Latin America’s crypto adoption by Chainalysis revealed that remittances and value storage are critical drivers in utilizing stablecoins. Contrastingly, Europe’s central, western, and northern regions feature the largest crypto economies globally. Such areas have higher DeFi and NFTs that are driving stablecoin adoption.

Way Forward in Europe

Europe may witness declining stablecoin usage owing to the push for regulatory clarity. The new provisions are bound to affect several stakeholders, including token and stablecoin issuers. Carrascosa observes that MiCA regulation mandates the stablecoin issuers to apply for operating licenses and publish white papers.

Compliance with the MiCA would allow more users to ditch fiat currency as more businesses earn and spend via stablecoins. Beaudroit notes that a similar trend is bound to occur within Latin America as more people earn their remuneration via crypto dollars and stablecoins. Often, such deposits remain within the crypto wallets for use in daily utilization.

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