Cryptocurrencies are on the march in South America despite the continent’s relatively small slice in the global ownership breakdown.
The number of users of cryptocurrencies such as Bitcoin and Dash continues to swell in many Latin American countries, and historically it is not hard to see why.
The last World Bank study revealed that as few as 49 percent of adults in the region had access to traditional banking, mainly due to the costs inflicted on potential new customers, and the bureaucracy involved in setting up a bank account. However, the deep penetration of smartphones continues to give autonomy to many without banking facilities by enabling them to conduct simple financial transactions using Bitcoin. South Americans love cash, it has always been the mainstay of a market economy, with credit cards still little used by much of the community for similar reasons as those for circumventing the traditional banking system.
Countries suffering inflation are currently the key drivers of Bitcoin and alternative currencies in South America and the mother of all these currently in Venezuela. For this reason, the movers and shakers of the crypto space in South America are rarely out of the press. Venezuela and Columbia are now almost joined at the hip, with President Maduro’s economic crisis causing refugees to flee across Venezuela’s nearest border.
With the International Monetary Fund (IMF) predicting that Venezuelans may face consumer prices that will “increase by 10 million percent over the course of 2019,” many nationals have been forced to flee, or remain but shun the traditional economy by using bitcoin as a tool.
In terms of tracking the rise of Bitcoin in the Americas, the numbers speak for themselves. The latest statistics show Venezuela’s weekly Bitcoin Volume increasing from 11 BTC in the first week of January 2017 to a staggering 190 BTC in the first week of January 2019. Volume-wise, the figures are equally impressive with trade volume in Venezuela up to 252 BTC in the last week of 2018. President Maduro’s saving grace, the Petro, backed by huge oil reserves has been a failure, and the country has turned to more traditional cryptocurrencies in order to bypass the worthless national currency, the Bolivar.
Bitcoin is now recognized as the only way of getting around the country’s currency controls, and bitcoin mining offers Venezuelans a chance to pay for good imported from overseas. Although the process is not sanctioned for individuals other than going through ‘official’ methods, residents are able to sidestep the government’s control to buy foodstuffs from Florida and Miami by trading Bitcoin for bolivars.
Brazil is the economic giant of South America, and a recent change in government has analysts waiting to observe how this might change the direction of the current legislation regarding cryptocurrency. Bitcoin use is certainly not undercover in the country, it is out there and being used as Satoshi intended. Supermarkets, construction, e-commerce, hospitality, and transportation have all become highly visible evidence that cryptocurrencies are becoming increasingly mainstream.
BTC, BCH or LTC are commonly used and now, a supermarket chain ‘Oasis Supermercados’ allows customers to use any of these to pay for groceries. Transportation companies, such as ‘Viação Garcia’ are also open to payment in any of these three currencies. Some businesses and retailers have been taking Bitcoin since 2013. Other businesses including Nobile Plaza Hotel, e-commerce website Fasttech.com, robotic and electronic parts retailer Webtronico, and Imperius Food are also accepting crypto.
Brazil’s new president, Jair Bolsonaro, has cryptocurrency advocates worried, however. His views are hard right and his opinions regarding women, race, immigration, and homosexuality, among other topics, have caused concerns amongst many. Both the use of cryptocurrency and questions around the treatment of Brazil’s minorities have come in to play, and these areas have already felt the effect of a change of government following his election.
The new administration has already canceled a contract which would have benefited indigenous communities living in the Amazon basin. The project with an elongated title “Study and diagnosis of socioeconomic viability of the creation of an indigenous cryptocurrency; development of the cryptocurrency platform; and implementation of that platform,” included the launch of a cryptocurrency affectionally referred to as the “Bitcoin of the Indian.”
As part of the project, the new cryptocurrency would have been distributed amongst Brazil’s indigenous communities, with organizers establishing a database of indigenous territories through working with local universities. Bolsonaro has not minced his words in the past regarding Brazil’s indigenous population arguing:
“There is no indigenous territory where there aren’t minerals. Gold, tin, and magnesium are in these lands, especially in the Amazon, the richest area in the world. I’m not getting into this nonsense of defending land for Indians.”
The number of Bitcoin ATMs in the country, the most in South America, speaks volumes when analyzing the degree to which the Bitcoin imprint is becoming more visible. There are now 17 ATMs around cities across the country. The city of Medellín, the second largest in Colombia, has recently installed the third Bitcoin ATM in one month.
The largest users of these ATMs are Venezuelans fleeing in greater numbers across the border into neighboring Columbia. Mostly uncovered by mainstream news in the past year, a staggering 1.9 million have fled poverty, hunger, crime and hyperinflation in Venezuela since 2015.
Dash has achieved great popularity in Columbia in some areas, often more so than the flagship cryptocurrency, with adoption on the increase, illustrated by an increase in merchant use of the Dash wallet in 2018. Bitcoin use is huge though, and in a comparison of the weekly volume of January 2017 to that of January 2019, it can be seen that the weekly Bitcoin volume in Columbia has increased from a 135 BTC to 364 BTC. The BTC weekly trade volume reached a maximum of 759 BTC in the last week of 2018.
Peru is not a big South American player but cryptocurrency use is on the rise. Bitcoin’s biggest hurdle is overcoming bad press caused by misuse. Peru’s Enrique Cardoza, Project Manager at Bitinka Exchange explains the situation and some of the complexities surrounding cryptocurrency business in the country:
“We can say that this is being divided into two camps: There are people who are very much in favor of promoting information and spreading the word so that people can learn. [And also] There are many people who know about this and take advantage of people’s ignorance.”
Cardoza claims that much of the problem has been caused by those who have deliberately cheated, damaging the fledgling ecosystem. It has affected the businesses as potential new clients now lack confidence in companies offering cryptocurrency services as they consider them to be risky. He claims that Ripple (XRP), and Ethereum (ETH) are the greatest cryptocurrencies in demand.
In other South American countries such as Bolivia and Chile, governments have restricted access to online payment systems like PayPal, who do not accept local documentation as a means of verifying the identity of the account holder. Bitcoin is being used more regularly in these countries because of limited financial services operating in these jurisdictions.
Chile, Bolivia, and Equador
Cryptocurrencies have never been legal in Bolivia and the government has been known to enforce its anti-Bitcoin stance with a firm hand. Mining and use of Bitcoin are still under strict regulation in the country. Chile is somewhat more forward thinking, and just recently, attempts to close cryptocurrency exchanges’ bank accounts has been thwarted by the Chilean anti-monopoly court granting these exchanges protection. In Equador, there are several ways to purchase Bitcoin and other cryptocurrencies and although still illegal, Bitcoin is often used by a small number of the population.
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