Cryptocurrency is gradually becoming the most talked about topic in the global digitisation ecosystem; a sector which is set to revolutionise the way we live and do business now and in the future.
Made up of thirty-three countries, the current population of Latin America is estimated to be 626, 741, 000 with Brazil, Mexico, Colombia, Argentina and Peru in that order being the most populous.
In Latin America, the response to cryptocurrency has not always been homogenous. For example, until recently, the Colombian press considered all things crypto to be related to illegal activity and simply refused to cover it. On the other hand, Mexico’s bitcoin exchange Bitso as of December 2020 raised an amount of USD 62 million in a round of Series B funding at an undisclosed valuation.
A lot of progress has been made in the region since 2020.
El Salvador – Early June 2021
El Salvador’s President, Nayib Bukele ushering in a new era of global monetary inclusion announced at the Legislative Assembly that he will be sending a bill to his country’s Congress in a week to make bitcoin legal tender. Lawmakers voted to approve the Bitcoin Law (Ley Bitcoin) on June 8th 2021, making the Central American country the first in the world to formally adopt the digital currency’s status as legal tender. Bitcoin surged a day after the law was passed, with the cryptocurrency jumping 6% to more than USD 37,000.
El Salvador’s journey to utilising cryptocurrency as a means of transacting business has been fuelled by the creator of Zap and the Strike Bitcoin payment app – Jack Mallers who announced at the Bitcoin 2021 conference that his company was working with El Salvador to implement a plan, something that has now come into fruition.
El Salvador runs an economy which is heavily dependent on remittances from its citizens working abroad. In 2019 for example, remittances alone totalled over 20 percent of the country’s GDP. Even though there are several agent cash pick up offices spread across the country with Western Union being the most conspicuous, sending funds can be quite complicated. Most of its citizens lack access to basic bank accounts with research estimating them to be in a region of 70 percent. The cryptographic functions of digital currency will come in handy in El Salvador, making a strong case for safe and secure online transactions; which is little wonder why the country has embraced it as legal tender.
Other Countries in Latin America Going Crypto
Paraguay could become the second country to adopt bitcoin behind El Salvador after a Paraguayan Congressman, Carlos Rejala announced that he will present a bill that will set favourable regulations for crypto mining and crypto exchange businesses for those that want to set up shop in the country.
Will Panama join El Salvador and Paraguay in adopting bitcoin? Very likely, as Panamanian Congressman, Gabriel Silva, in his comments on El Salvador’s move to adopt Bitcoin as a currency on Twitter called for Panama to do the same.
Mexico is said to be considering changing bitcoin’s status as legal tender in the coming months. In March 2018, Mexico enacted a law that provides broad rules applicable to virtual assets (i.e., cryptocurrencies). These assets, which are not legal currency, are defined as representations of value electronically registered, utilized, and transferred by the public as a means of payment.
Even though the use of crypto currency is booming in Brazil trading over $5 billion in the first quarter of 2021 alone compared to $1.2 billion in all of 2020, it is yet to announce its interest in adopting the digital currency as a legal tender.
Argentina ranked 21st in the world in realised bitcoin gains last year, with some USD 200 million.
Issues of volatility definitely come up as a downside of using cryptocurrency for financial transactions, however, just as with the use of fiat money there are several risks associated which needs to be properly managed.
Latin America is definitely going crypto, its most influential countries are on board with the use of digital currency for financial transactions which has already disrupted the banking industry. It is easy to predict that soon we will hear announcements of most of its thirty-three member countries jumping onto the cryptocurrency bandwagon. We can certainly expect this.
