The Growing Rate of Crypto Adoption in South America
And why the United States should consider taking notes.
By: Nick Corso
Cryptocurrency adoption is steadily growing in many regions of the world, and Latin America has particularly embraced such innovation with vim and vigor. The enthusiasm underlying this adoption makes sense considering many countries in this region struggle with high inflation and weak national fiat currencies. Latin Americans have classically preserved their wealth by holding USD or gold because of the uncertain and depreciative nature of their native currencies.
With the advent of new cryptoeconomic technologies, Latin Americans now have alternatives such as bitcoin, when it comes to storing their wealth. Participation in this digital economy is far more accessible than traditional financial services–since the primary barrier to owning bitcoin is internet access.
This week’s Motion to Compel will explore the ways certain Latin American countries have approached cryptocurrency adoption and why it may be important for the U.S. to follow suit.
El Salvador has arguably taken the most ambitious strides to complete cryptocurrency adoption and integration. Since September 7, 2021, the country has held bitcoin as legal tender. Alejandro Zela, El Salvador’s Finance Minister, is confident making bitcoin legal tender was the right move, regardless of the recent downtrend in the crypto markets.
Since adopting BTC, large portions of the country’s previously unbanked citizens have gained access to financial services, opening up the potential for greater participation in both the global and national economies. This is evidenced by the fact that close to sixty percent of El Salvador’s citizens now use the Chivo Wallet – El Slavador’s official BTC and dollar digital wallet. Though there are certainly critics of El Salvador’s bold leap into crypto, it appears making BTC legal tender has provided the opportunity of financial stability to many citizens who did not have it before.
While current market trends have meant tough times for many crypto holders–individuals, businesses, and sovereign entities alike–the long term viability of crypto remains promising.
While Brazil has not moved at the same speed as El Salvador, regulation involving crypto has certainly been on the Congressional agenda. A bill, approved in April is primarily aimed at cutting down on crypto related scams, but also contains incentives.
It makes penalties commensurate with the level of fraud committed, in addition to offering crypto-friendly inducements, such as tax exemptions for crypto miners using 100% renewable energies. This is just one of the proverbial carrots Brazilian lawmakers are using to entice crypto immigration and economics.
Brazil seems to have taken a measured approach to crypto regulation by incentivizing clean mining but also attempting to mitigate fraudulent activity surrounding cryptocurrencies.
Argentina is no stranger to extreme inflation levels and crippling economic woes, just as it is quite familiar with domestic, political, and economic oppression.
The idea of a decentralized and trustless economic system likely appeals to a population that has endured what the Argentinians have – which may explain why so many in Argentina are opting for cryptocurrencies.
San Martin de Los Andes, a city in Argentina, is clearly putting its trust in code; currently forty-percent of businesses in this city accept bitcoin. Many Argentinians are utilizing stable coins pegged to the USD, providing what they believe to be a more reliable wealth preservation alternative to the Argentine peso.
The U.S. Should Consider the Long Term Opportunity Costs of Not Embracing Crypto Adoption
Some U.S. representatives, like Representative Norma J. Torres, have disapproved of El Salavador’s move to make Bitcoin legal tender by introducing the Accountability for Cryptocurrency in El Salvador (ACES) Act, proposed to mitigate the U.S. exposure to financial risk due to El Salvador’s actions. Representative Torres has tweeted:
“El Salvador’s adoption of Bitcoin is not a thoughtful embrace of innovation, but a careless gamble that is destabilizing the country.”
More recently, Senator Elizabeth Warren wrote a letter to the Comptroller of the Currency encouraging the discontinuance of banks’ ability to offer crypto related services. Senator Warren has repeatedly expressed concerns about crypto’s decentralized nature, climate impact, and alternative payment applications.
The negative stigma surrounding cryptocurrency adoption from some U.S. lawmakers may lead innovators to seek regulatory certainty in more friendly jurisdictions. Furthermore, aggressive negative treatment also ignores the potential of cryptocurrency to address struggles in the U.S. similar to those it has helped alleviate in Latin America.
According to a 2019 report by the Federal Reserve, 22% of American adults are either unbanked or underbanked. Cryptocurrencies can provide opportunities to help address the issue of the unbanked in America, much as they have in countries like El Salvador. Rather than solely focusing on the negative aspects of cryptocurrencies, U.S. lawmakers and regulators should give similar attention to the positive, such as the opportunity they afford underserved Americans to participate in the U.S. economy. Traditional financial institutions have on a large scale failed the underserved, domestically and abroad..
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