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Latin America dancing to the rhythm of crypto

June 22, 2022
Article review author
Bonniey Josef

In Summary:

  • Brazil crypto’s real estate transactions
  • Brazil introduce CBDC
  • Argentina adopts bitcoin
  • Cuba welcomes crypto on a personal level
  • Panama intends to legalize more currencies 

In the wake of a volatile crypto environment and rocketing inflation globally, Latin America recorded a good season in 2021. However, the crescendo of the matter was in May 2021 when Mexico took home the region’s first-ever crypto unicorn exchange with Bitso. 

Four months later, El Salvador approved Bitcoin as an official currency. Most impressive, Brazil, Venezuela, Colombia, and Argentina ranked high in the 2021 Chainalysis crypto adoption global index. So even after the historic global crypto crash from its peak in November 2021, the impact hits differently across Latin America. 

Unsurprisingly, volatility is nothing new for a region long plagued by closed capital markets and an unstable economy. As a result investors more accustomed to unpredictability take things in stride and display admirable buoyancy despite the odds. 

Brazil accepts crypto in real estate 

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Gafisa – a top Brazilian real estate investor – metamorphoses the process by eliminating unnecessary mediators in real estate through Bitcoin payments. A recent press release by Guilherme Augusto, Gafisa CEO, states that the brand considered this initiative thanks to crypto’s steady growth. Apart from Bitcoin, Gafisa now accepts 16 other crypto payments. Some of the most prominent options include Solana, Cardano, Ethereum, and $XRP. 

With approximately 1 in 130 Brazilians living in homes built by Gafisa, there is plenty of potential here. However, before buying a property with crypto, you must fill out a special form indicating your intention. Gafisa then thoroughly scrutinizes the details given before issuing a wallet address. 

Brazil to welcome a CBDC in 2022

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Another wave of excitement hit Brazil on May 24th when Stellar Development Foundation announced a joint venture with Mercado Bitcoin, the biggest crypto and digital asset brand in Latin America. The partnership focuses on introducing central bank digital currency (CBDC) in Brazil. CBDCs are a country replica of currency in digital form. They are regulated and issued by a central bank or any monetary authority. Thanks to their ability to expedite fiscal policy and financial inclusion, CBDCs are a force to reckon with in recent times. An executive post shared by Stellar Foundation indicates that Mercado Bitcoin intends to work on several projects in collaboration with LIFT (Laboratory of Financial & Technological Innovations of Brazil. The idea is to develop the best CBDC with minimal effort. 

The project supported by the (FENESBAC) National Federation of Central Bank Servers and (BC) Central Bank of Brazil hopes to materialize before the end of 2022. Brazil’s Central Bank Governor, Roberto Campos, announced that the plan should roll out in the year’s second half.

Initially, it will start with a pilot version before the official launch. Moreover, the Reserves Transfer System or the STR will determine the CBDC pricing. Roberto pointed out that banks will now issue stablecoins, solve DeFi issues and facilitate small contracts through this system. He added that “the company hopes to set off robust solutions that meet all parameters through Stellar’s blockchain technology”. Mercado’s main competitors include established brands like Microsoft, Visa, and Aave. With such big names on the drawing board, this development is a giant leap for the region toward digital transactions.

Argentina Adopts Bitcoin in the Middle of Inflation

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Unlike other Latin American countries, Argentina boasts a healthy and robust economy. Still, roughly 37% of the country’s population lives under the poverty line. To hedge against financial inequality, the government has recently become friendlier towards crypto transactions. A market intelligence report recently quoted by Reuters states that Argentina has an increased crypto penetration of 12%. This is a plus compared to other neighboring countries like Mexico and Peru.

Given that Argentina has strict capital regulations on foreign exchange, most Argentines now turn to stablecoins as a reliable option for storing value in dollars. Ethereum founder Vitalik Buterin applauded the country on this milestone in his visit to Argentina in December 2021. Argentina President Alberto Fernandez also supported the move but requested caution among investors. In a YouTube interview, he said, “While cryptocurrency is on the rise, this is an issue that requires precaution. However, it’s a steady investment with a high likelihood of helping the nation contain inflation”.  

Cuba joins the bandwagon 

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Glad tidings continue to engulf this Caribbean Island barely three years after the integration of mobile internet. The initiative opened the way for crypto adoption on a personal level in April 2021. Indeed, this was a relief to enthusiasts in the region who consider crypto transactions the best solution against severe US sanctions. The beauty of crypto is that it allows dealings in an efficient and decentralized manner. 

Currently, approximately 100,000 Cubans use crypto in one way or another. While this sounds like a negligible number, remember that the country is still finding its way in the industry. Even after giving the nod to personal crypto transactions, Cuba issued regulations on virtual asset service providers in April 2022. A bank authorization published in the government gazette indicates those interested in transacting with crypto must apply for an annual license first. That way, the bank can vet an investor’s legality, project details, and socioeconomic interests to prevent fraud.

Panama plunge on expanding crypto usage

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A recent bill presented in Congress seeks the legalization of eight cryptocurrencies in Panama. If the law gets approved, Panamanians would finally transact business with Bitcoin, Algorand, XRP Stellar, Ethereum, Elrond, Litecoin, IOTA, and XDC Network. Also, the bill contains some provisions on tokenization. This happens when a country produces a digital currency equivalent to a physical asset. 

With money laundering prevalent in Panama, the government strives to instill stiff regulations plus a reliable watchdog that checks on transparency and minimizes illegal deals.

FAQs

Why is Brazil the hub of crypto in Latin America?

Brazil is the largest economy in the region and is currently the home to Mercado Bitcoin, the first crypto unicorn valued at approximately $2 billion. The current crypto market value for Brazil is $27.6 billion.

Is it safe to invest in crypto startups in Latin America?

Rapid digital assets and crypto expansion instigate a more robust environment for startups. Moreover, the value of crypto entrepreneurship rose to $650 million from $68 million in 2021. However, practice caution because there are still no valid regulations set.  

Why is Latin America rapidly adopting Bitcoin?

Recent Peso shakiness and high inflation of above 55% prompt people to seek lesser volatile ventures. While crypto has its unpredictability, it’s more stable and enables transactions in a decentralized manner.

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