Remittance: One of The Key Crypto Adoption Driver in Latin America

• The recent Chainalysis report showed the analysis of Latin America’s on-chain activity.
• The report identified three key use-cases that drive crypto adoption in Latin America.
• The three use-cases are ‘Storing Value,’ ‘Seeking Alpha,’ and ‘Sending Remittances.’
• Crypto adoption in the Latin America region constitutes for a 9.1% share of the global crypto value in 2022.

According to the report published on October 20, 2022 by Chainalysis Team, Latin America became the seventh largest cryptocurrency market in its index of year 2022. As the Latin Americans have received $562.0 Billion in the form of crypto from July 2021 to June 2022. It represents a 40% hike on the previous year’s total.

Additionally, it can be seen that Latin America is the center of five of the top-30 countries in this year’s crypto index including Brazil (7), Argentina (13), Colombia (15), Ecuador (18), and Mexico (28).

The International Monetary Fund found in April 2022 that the combined inflation rate of the five largest Latin America’s economies Brazil, Chile, Colombia, Mexico, and Peru had surpassed 8%, a 15-year high.

The Remittance Campaign

Remittance refers to a non-commercial money transfer from a party to another, and in Latin America it is a common term. Its formal remittance market is estimated to reach $150 Billion in 2022, whereas the crypto-based remittance services in this region seem uneven, but swift.

The official crypto wallet of the Government of El Salvador, Chivo, processed $52 Million in Bitcoin remittances from January to May this year. 

The World’s Largest Crypto Remittance Corridor: The US-to-Mexico Border

Felipe Vallejo, Chief Regulatory Officer at Bitso, Mexico’s largest crypto exchange, stated that “a high percentage of families in Mexico’s lowest socioeconomic classes receive remittance payments from family members abroad — and the crypto industry’s slice of that $51.6 Billion market is rapidly growing.”

It must be noted that Bitso, solely processed more than $1 Billion in US-to-Mexico remittances in 2022 as of June. This represents a year-over-year growth rate of 400% and a strong-grip on 4% of Mexico’s remittance market. 

On the other hand, Coinbase is giving traditional cross-border retail payment providers like Western Union a run for their money. As in February 2022, Coinbase announced the launch of crypto cash-out services across 37,000 establishments in Mexico.

From the on-chain data report by Chainalysis, it shows that the users in countries with weaker economies tend to rely on cryptocurrency for remittances and, if inflation is high, for savings, while users in more developed markets like Brazil treat cryptocurrency more as a risky investment. 

Now, it will become quite interesting to see how the Latin Americans will shift their needs as the cryptocurrency develops in this region and what use-cases will emerge to fulfill their requirements.

Nancy J. Allen is a crypto enthusiast and believes that cryptocurrencies inspire people to be their own banks and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning.

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