Latin America is quickly establishing itself as the global reference for how cryptocurrencies will affect people’s daily lives in the coming years.
All eyes are on El Salvador to see how it will affect the country’s economy and people’s standard of living, as in any country that adopts cryptocurrencies as legal tender. What happens there will impact how other countries deal with cryptocurrencies.
HOW DID THIS IDEA COME ABOUT IN LATIN AMERICA?
Latin America is suitable for Bitcoin (BTC) adoption for numerous reasons, including greater financial stability and financial inclusion among its citizens.
Because remittances are so prevalent in Latin American countries, they are an excellent use case for cryptocurrencies. In 2021, these remittances accounted for 11% of Mexico’s GDP and 20% of El Salvador’s and Honduras’ GDP.
Even though they contribute significantly to the GDP of Latin American countries, remittances are associated with high fees (10% of the remittance amount on average) and long waiting times (2.4 days on average from the U.S. to other countries).
People who have moved away from their home countries are forced to pay exorbitant remittance fees, only to have their family wait several days or weeks for the money.
Not only can Bitcoin and other cryptocurrencies be traded with a grid bot, but they also offer the best way to send money to loved ones much faster and with little or no transaction costs.
Many Latin American countries have unstable currencies due to high inflation rates and political reasons. Venezuela and Argentina belong to this category, where rates reached 1,575% and 69.5%, respectively.
Despite their reputation for volatility, cryptocurrencies are more stable than several Latin American currencies. Despite their volatility, the value of Bitcoin and Ethereum has increased dramatically, while the latter has experienced hyperinflation.
This appreciation increases the need for nations facing inflation to use alternative currencies than their own national currency. Latin Americans consider cryptocurrencies safer than fiat currencies because they are decentralized and do not rely on government-controlled organizations, banks, or third parties.
Citizens in Latin America no longer have to rely on their governments, which generally have little trust, or on third parties that may work against their interests. Instead, they can benefit from the lack of confidence in the blockchain.
Finally, the number of unbanked Latin Americans is undoubtedly the most compelling reason Latin American countries accept cryptocurrencies as legal tender. There will be more than 16.3 million unbanked people in Brazil by May 2021.
Many people in Latin America lack access to basic financial services, such as the ability to safely borrow money, accumulate wealth, earn interest, and save money.
WHY IS BITCOIN SO POPULAR IN LATIN AMERICA, EVEN THOUGH THERE ARE OTHER CRYPTOCURRENCIES?
Because Bitcoin is the oldest and most widely used cryptocurrency as a store of value and medium of exchange, it is particularly attractive to Latin American countries. In this respect, it is something like gold. Other cryptocurrencies lack the trust and security that Bitcoin has created.
Even Ethereum, the second largest cryptocurrency by market capitalization, does not have the global appeal of Bitcoin. Despite its many advantages as a platform for the decentralized apps that will form the basis of Web3, Ethereum does not offer the same ease of payments and savings as Bitcoin.
For countries looking to adopt Bitcoin as legal tender, Bitcoin is currently a smarter and more reliable alternative than any other cryptocurrency. People concerned about inflation in traditional currencies issued by states are attracted to Bitcoin by its limited supply of 21 million coins.
Unlike other fiat currencies, whose value is threatened by the monetary and fiscal policies of the countries that created them, Bitcoin has a reputation for being “sound money” with a strict supply constraint.
In this regard, Bitcoin outperforms alternative cryptocurrencies such as Ether, where there is no supply constraint.
El Salvador has led the adoption of cryptocurrencies across Latin America. El Salvador was the first government to widely adopt cryptocurrencies by accepting Bitcoin as legal tender, but it won’t be the last, and there are many things we expect from other countries in the region.
Other countries will gradually introduce similar laws, especially now that Bitcoin has passed the test of time. Countries like Paraguay, Argentina, Panama, and Cuba have begun to consider adopting cryptocurrencies as legal tender.
As more countries accept cryptocurrencies, the focus will shift to building the infrastructure and services that enable these decisions. Establishing more hackathons will allow for a smooth transition to greater acceptance and use of bitcoin. These new apps will also improve financial inclusion by offering a new range of services for banked and unbanked people.
With information from Latina Press