As countries in Latin America witness the new wave of innovation and financial empowerment experienced by citizens in El Salvador, they are beginning to realize they have much to gain from Bitcoin adoption.
FREMONT, CA: Latin America is quickly becoming a global model for how cryptocurrencies will make space in the daily lives of citizens in the future years. All eyes have turned to El Salvador- to see how the adoption of cryptocurrency is going to influence its economy and the quality of life of its citizens. This, in turn, will also have an impact on how other governments approach cryptocurrency.
For a variety of reasons, Latin America is a suitable region for Bitcoin adoption, many of which revolve around boosting residents' financial inclusion and maintaining financial stability. For instance, remittances are quite common in Latin American countries and are an ideal use case for bitcoin. Early in the year 2021, these international transactions accounted for 20 percent and 11 percent of the GDP of El Salvador and Mexico respectively. While remittances represent a large share of the GDP of Latin American countries, they also come with costly commissions and extended wait times. Individuals who leave their native nations with the intention of sending money to their relatives are compelled to pay exorbitant transfer fees just to have their families wait days or weeks. Bitcoin and other cryptocurrencies provide the best of both worlds as individuals can send and families can receive money more quickly and also with minimal transaction fees.
However, many Latin American countries like Venezuela and Argentina have currencies that are extremely volatile due to high inflation rates and political issues. Despite the fact that cryptocurrencies are considered volatile, they are nevertheless more stable than several Latin American currencies. Despite its instability, Bitcoin and Ether have substantially surged in value while the latter has undergone hyperinflation. This appreciation strengthens the rationale for using alternative currencies in nations where their own currency is undergoing inflation.
Another reason Latin Americans consider cryptocurrency to be safer than fiat currencies is that it is decentralised, meaning it is not reliant on government-controlled organisations, banks, or other third parties. Citizens in Latin America no longer have to put their faith in their governments, in which they often have little faith, or in third-party entities that may act in their own self-interest. Instead, they can make use of the trustless nature of the blockchain.