In Latin America, a revolution is growing now without a sound, with Venezuela and Argentina at the vanguard. With crippling inflation and the devaluation of their national currencies, both countries are looking to cryptocurrencies as a critical solution. Digital currencies including Bitcoin and Ethereum may be the talk of the town in many parts of the world, but here in these two countries, the appetite for adoption is based on necessity rather than just novelty, as both grapple with an explosive mix of fundamental financial woes.
Venezuela is a poster child for necessity ingenuity regarding cryptocurrency adoption. The country’s bolívar has been practically worthless for years as steady doses of hyperinflation sent prices soaring by staggering percentages. In this disordered financial reality, Venezuelans have sought refuge in digital currencies as a store of value, with Bitcoin having emerged as a popular choice. But it’s not only people looking for financial peace. The Venezuelan government also ventured into the crypto space by unveiling the Petro, a digital currency backed by the country’s oil reserves, in 2018. While promoted as a possible answer to Venezuela’s economic free fall, the Petro’s success has been shaky. Still, the country’s foray into cryptocurrency is a sign of a desperate attempt to get through the wreckage of its national currency.
Argentina, for its part, has endured its own recent history of deep financial crises. The peso has lost nearly a third of its value in recent decades and inflation maintains a steady threat. In response to these continuing economic challenges, a large number of Argentinians have sought out Bitcoin and other digital currencies as alternatives. As local financial institutions were unable to provide a viable solution, Binance and other local crypto exchanges exploded in user growth. Cryptocurrencies are also becoming a form of payment, not just a store of value, as Argentinians seek protection from the devaluing peso.
What’s particularly striking about cryptocurrency’s surge in Venezuela and Argentina is that it seems to be contributing to a larger economy and society rather than being simply a means of wealth management. Digital currencies are enabling entire communities to sidestep the shortcomings of legacy banking systems. In Argentina, cryptocurrencies are helping to reroute cross-border transactions and remittances, enabling families to wire money overseas with fewer hurdles and lower fees than traditional banks permit. In Venezuela, digital currencies are providing a means for citizens to evade official economic restrictions and participate in the evolving global economy.
Nevertheless, in all probability, the way to global cryptocurrency adoption was not smooth. And their governments now face challenges over how to regulate and tax the digital coins, should their use go mainstream, while the technological infrastructure that could enable broad use of digital currencies is lacking. Many Venezuelans and Argentinians do not have the means or information to fully participate in crypto technologies. For now, the transition to cryptos is motivated more by necessity than a broad acceptance of the technology.
This rising acceptance of crypto in those two countries reflects a wider pattern in Latin America, where faith in traditional banking is rapidly breaking down and interest in financial technology is on the rise. Their embrace of the digital currency has implications not only for their own economies but also for a region that is already in crisis — and where other countries, like Venezuela and Argentina, seem to be giving digital currencies a try. It is too soon to say whether or not cryptocurrencies have arrived to stay in Latin America, but, at least for now, they are providing important cover from economic uncertainty.
