Report: Ineffective Banking System in Latin America Fuels Cryptocurrency Usage in the Region
The latest research on the part of cryptocurrency research firm Chainalysis shows that businesses in Latin America are using cryptocurrency to buy goods due to high inflation and the unstable nature of fiat currency.
Chainalysis’s Report
Chainalysis’s research unveils that cryptocurrency transaction from Latin America to the outside of the region has surged since the onset of Coronavirus pandemic. And the major portion of cryptocurrency transactions has transferred to East Asia. According to the research report:
“With $25 billion worth of cryptocurrency sent and $24 billion received over the last year, Latin America has one of the smaller crypto economies by volume transacted, ahead of just Africa and the Middle East. The region represented between 5% and 9% of all cryptocurrency activity in any given month over the last year.”
Mostly, the unbanked businesses and individuals are using cryptocurrency as a store of value, speculative investment, and a mean of exchange. The research writes that Latin Americans are going for cryptocurrency as the banking system in the region is ineffective.
Cryptocurrency’s Transaction Ties to East Asia
In fiat, the transactional volume comes from the US via remittance as migrant workers working in the US send funds back to their families. But in cryptocurrency, Latin America has relation with East Asia as the transactional volume between the two regions reaches above $1 billion.
Luis Pomata, the co-founder of the Paraguay-based exchange Cripex, told Chainalysis:
“Lots of goods are imported into Paraguay from China, and then make their way to other countries like Brazil. Lots of the businesses buying these goods use Bitcoin because it’s faster and easier. Banks in Paraguay are worried about money laundering and picky with who they’ll work with, so the banking application process is long and difficult — many businesses are rejected. And even if you have a bank, it is still very hard and costly to make a wire transfer due to the amount of supporting documentation you need to provide. That is the main reason people switch to crypto.”
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