Cryptocurrency adoption in Latin America — a region with laser eyes
Written by Robin Prock
B-E-E-D.
No, this is not a band like ABBA, ACDC or LFO (with their famous hit LFO)…
…but the most popular cryptocurrencies in Venezuela: Bitcoin, Ether, Eos and Dash.
While in 2020 the 1 million bolivar bill was worth 0.40 USD, the population paid for their shirts, pants and El Pabellón Criollo in cryptocurrencies.
And the military is getting in on the act, too: In a bunker outside Caracas, there are no tanks, laser weapons or supersonic missiles, no, only ASIC miners in front of which soldiers are doing their duty. Venezuela is no outsider, though — almost all of Latin America wears laser eyes now, like Cyclops from the X-Man. Which countries are whole ahead? What are their crypto laws? And what is driving the adoption of cryptocurrencies in Latin America?
Let’s look the facts in their bright red eyes:
Cryptocurrencies in Latin America — What is the state of the region?
1. El Salvador
Then the bombshell burst. When El Salvador’s President Nayib Bukele joined the Bitcoin conference in Miami in a video, he announced the unbelievable: He wanted to propose legislation to Congress to make Bitcoin legal tender.
Those who wanted to transcribe his further speech could only continue it with [indiscernible] [indiscernible] [indiscernible]. For the clapping audience stifled the president’s voice as if they were stuffing a handkerchief in his mouth. And the president kept his promise:
On June 9, 7:22 UTC, 62 of 82 congressmen voted for the law.
But what exactly does the law say? Here is — in my opinion — a brief summary of the most important articles:
- Article 1: Bitcoin (BTC) becomes legal tender in El Salvador.
- Article 2: The free market dictates the exchange rate between BTC and US dollars.
- Article 3: Prices are allowed to be in BTC.
- Article 4: Citizens are allowed to pay their taxes in BTC.
- Article 5: The exchange of Bitcoin for another currency is NOT subject to capital gains tax.
- Article 7: Every economic operator must accept BTC if his customer wants to pay with it.
- Article 8: The state will train its citizens to transfer BTC safely. It will also create ways to transfer BTC and automatically exchange BTC for USD.
The law will come into effect on September 7, 2021. Still, El Salvador will not force any citizen to use Bitcoin if their pupils are still made of $ and not BTC. But that’s not all… Bitcoin as an official currency was just the starting gun. More laws and resolutions are on the starting blocks of the Bitcoin rally, waiting to sprint to the finish line…
- El Salvador is setting aside $120 million so that every citizen can get $30 in BTC when they sign up for a digital wallet.
- El Salvador wants to mine Bitcoin with volcanic energy — Bitcoin mined from lava, an invitation for the MEME vultures:
Source: Reddit
- El Salvador wants to attract crypto entrepreneurs and enthusiasts and offers them permanent residency. This should boost the economy and steer innovation into the country.
So: if your country’s Bitcoin laws don’t suit you, El Salvador welcomes you with open arms, with Bitcoins made of lava and 0.00000 taxes on Bitcoin. I wonder if other Latin American countries will follow El Salvador’s lead? Who knows…
…anyway, some deputies and especially the population are in favor of friendly crypto laws. Let’s take a look at two more countries, although after El HODLador they seem like you’ve already eaten the lobster in the restaurant and now the waiter brings the appetizer…
2. Brazil
As far as cryptocurrencies are concerned, Brazil’s legal code is like a cover without pages….
…the creation, use, trading and circulation of cryptocurrencies are largely unregulated. However, that hasn’t slowed citizens down:
On Brazil’s largest trading platform, Mercado Bitcoin, nearly 5 billion was traded in cryptocurrencies in the first quarter of 2021 alone. In addition, Brazil is one of the first countries having crypto ETFs (something the U.S. fails to do) — namely one for Bitcoin, one on the Nasdaq Crypto Index, and eventually one on Ethereum is to follow.
But what about on the regulatory front? Will pages fill the covers of the legal code soon? Two deputies of the Chamber of Deputies — the legislative power, comparable to the House of Commons in Great Britain — are campaigning for this.
Who are they?
One is Fábio Ostermann, State Deputy for Rio Grande do Sul of Brazil. He has put laser contact lenses on his Twitter account and supports Bitcoin:
Source: Twitter
On the other hand, Gilson Marques, another Federal Deputy of Brasil. He also added a photo with laser eyes to his Twitter profile:
Source: Twitter
That’s all so far — just laser eyes, no laws yet. Still, it shows: encouragement is there; and if the experiment in El Salvador succeeds, maybe Brazil will pass laws too. So let’s move on to the next country:
3. Colombia
The procession begins:
The men come in white shirts, the women wear plaid skirts and white blouses as they parade through the streets waving large palm fronds in their hands….
…it is Palm Sunday in Colombia and THESE leaves of the palm trees rise like peacock feathers above the heads of the people. They are leaves of the Quindio wax palm — the national tree of Colombia. Why am I telling you this?
The Quindio wax palm could equally stand for Colombia’s crypto legislation.
Why? Because the palm tree grows old like a Galápagos tortoise and only grows very … very … very slowly.
Likewise, crypto laws in Colombia are making slow progress:
First cryptocurrencies were ignored like a pimple on the end of the nose, then in 2018 individual banks closed the account of crypto companies after the Colombian financial regulator, SFC, warned about cryptocurrencies …
…but now the mood is changing.
A one-year pilot project has been running since March 2021, allowing nine crypto companies (exchanges) to test banking products — users can deposit (cash-in) and withdraw (cash-out) funds through a bank.
How does it work?
These nine companies have each been assigned a bank to handle the fiat part. However, the companies operate under their own rules; this allows the government to collect data to set regulations later.
(Of course, they comply with legal requirements such as anti-money laundering).
In addition, Colombia is one of the countries with the most Bitcoin ATMs in Latin America. A full 50 of them are located in the country — 26 of them in Bogotá. By comparison, there are only 5 in El Salvador.
Source: Bitcoin ATM Radar
And one more thing: Colombia ranks 9th in Chainanalysis’ “The 2020 Global Crypto Adoption Index.”
The index measures how cryptocurrencies permeate citizens’ daily lives and how they are used to pushing value back and forth like poker chips.
Most recently, “LocalBitcoins” has confirmed this (the world’s largest peer-to-peer Bitcoin marketplace).
According to its research, Colombia won the bronze medal: the country is the third-largest market of LocalBitcoin with 11.3 percent of the total volume.
What does this data show?
That Bitcoin is conquering citizens’ wallets, purchases and accounts bit by bit — because LocalBitcoin is not a trading pond for professional and big investors; mainly regular people are swimming in it.
…
I could list more examples now, like Paraguay, which wants to regulate cryptocurrencies and mining… or politicians from other countries, like Gabriel Silva in Panama, Senator Indira Kempis de I. of Mexico or Francisco Sánchez in Argentina.
Everywhere there are voices advocating crypto. Still, I don’t want to wallpaper the text with laser eyes like a teenager wallpapers his wall with posters of Justin Bieber… and rather get to the question:
What drives the adoption of cryptocurrencies in Latin America?
Why Latin American countries adopt Bitcoin and other cryptocurrencies
What are the reasons why countries are now jumping on the crypto bandwagon like cowboys jumping off their mustangs onto the cars of a train when they want to rob it?
(never seen Shang-High Noon?)
Basically, there are five of them:
- Many people are unbanked: El Salvador’s Bitcoin law itself states “That approximately seventy percent of the population does not have access to traditional financial services.” And the World Bank also estimates: 50 percent of the Latin American population has no connection to the banking system. What they do have is an Internet-enabled device — and thus access to wallets, exchanges and online stores that accept crypto. This allows the population to skip the banking system and connect directly to the blockchain.
- Remittances: 20 percent of El Salvador’s GDP is remittances — money that emigrant workers send home to their families to spend. The problem: The average fee gobbles up 6.38 percent. Sometimes much higher. And besides, it takes days to get the money in the account (if you have one). Crypto does it cheaper — and much faster.
- Wealth protection: “corralito” — This is what Argentines called the cash restriction that limited cash to 250 pesos per week in 2001. This was Argentina’s way of preventing queues from forming in front of ATMs and people withdrawing all their assets. Latin America is just known for bankruptcies, economic crises, and inflation: since its independence in 1816, Argentina has failed to repay its debts NINE times; Venezuela’s inflation in 2019 was a handsome 65,374.08 percent; and because of Corona, many countries are in crisis. Bitcoin, on the other hand, is a safe haven for wealth — it is firmly anchored and defies inflation.
- Stimulating the economy: El Salvador’s president has already announced it — with the help of loose crypto laws, he wants to attract crypto companies to the country. Blockchain is one of the megatrends of the 2021st century, and it could flush a lot of money into a broke economy.
- FOMO — Fear of missing out: What is FOMO? You know it in the stock market: Prices go up, you get greedy, turn off your brain and get in just in time before the price turns down again. But FOMO can infect countries, too: They’re pulling out their forks and want a piece of the pie, too, as El Salvador bolsters its economy through Bitcoin. Panama’s congressman, Gabriel Silva, puts it aptly, “This is important. And Panama must not be left behind. If we want to be a true center for technology and entrepreneurship, we must support cryptocurrencies.” Source: Twitter.
Perhaps there are other reasons, but these seem the most valid to me. What’s next for cryptocurrency adoption in Latin America?
Who knows, everything else is speculation.
However, the traditional financial system does not like to see it. For example, the IMF sees legal and economic problems with Bitcoin becoming legal tender in El Salvador. But that was to be expected.
Anyway, Latin America is a hidden crypto hub and if El Salvador succeeds, more surprises may await us!
Follow us on all platforms!
