Latin American companies are looking towards crypto as an escape from the banking system.
New York-based blockchain analytics firm Chainalysis has published new research highlighting there have been up to 200,000 crypto transactions in the past year, worth more than $1 billion between Latin America and Asia.
The study Latin America Mitigates Economic Turbulence with Cryptocurrency, analyzed crypto trends in Latin America between July 2019, and June 2020, and shows that banking access issues and the need for remittances are driving unique patterns of cryptocurrency usage, especially in crossborder commercial-related transactions.
While North America and Western Europe are the biggest source of fiat remittances to Latin America, East Asia transactions lead the way in the volume of crypto transactions. Many of those payments are commercial transactions between Asia-based exporters and Latin America companies.
Speaking with Cointelegraph, Kim Grauer, head of research at Chainalysis, said the company was unable to point to one single driving factor as there are differences across Latin America among the different countries, “with different political and banking systems”:
“What we can say: the use of P2P exchanges is a key service for adoption in Venezuela, a large professional market drives adoption in Brazil, and a substantial commercial market drives adoption among Argentina, Paraguay, and Brazil as they trade goods, often imported from China.”
The study quotes Luis Pomata, co-founder of the Paraguay-based exchange Cripex, who said that banks in Paraguay are worried about money laundering “and picky with who they’ll work with.” That’s why the banking application process is “long and difficult,” adds Pomata, because many companies are rejected by the banks.
Chainalysis clarifies that “many individuals” are also unable to get bank accounts in Latin America, helping to boost crypto adoption in the region.
In July, Bitso, one of the biggest cryptocurrency exchanges in Latin America, hit 1 million users prior to its launch in Brazil.
According to Santiago Alvarado, director of cross-border payments at Bitso, the exchange’s success in Argentina is connected with extraordinary crypto activity and an increased demand for cross-border payments in the local market.