Bitcoin has been an emerging asset for many years and has many uses – including as a digital currency and a store of value. Latin America has been one areas to embrace Bitcoin, but why? Let’s take a look.
Challenging Banking Systems
Between March and April 2022, Mastercard recently surveyed Latin America about their cryptocurrency attitudes. The payments processor included over 35,000 people.
51 percent of the population has used it already. A further 33% say that they have used a stablecoin. And 86 percent are using new payment methods.
A big reason why they have embraced Bitcoin and cryptocurrencies is because for certain Latin American countries, being underbanked is an issue, and many people cannot access regular banking services. This is one of the major reasons as to why Bitcoin has grown in popularity because it has become a safer place for people to store their wealth.
A Reduced Risk of Inflation
Bitcoin is often called an inflation-resistant asset due to the limited supply of Bitcoin that can ever exist. This is in stark contrast to some Latin America countries where inflation can mean wild swings in the value of certain currencies, such as in Argentina. Reuters have reported that the Argentine peso now trades at nearly a 50% discount in the black market and its bonds are worth roughly half of what they were after the country’s $100 billion-plus 2020 debt restructuring. While Bitcoin does have price volatility, you can’t continually print Bitcoin like a currency, so the risk of it becoming extremely devalued like the Argentine Peso is much lower.
Bitcoin Gives Power Back to Citizens
Because of very low faith in institutions and the legal system, some residents try to remove the influence from major institutions such as banks and governments as much as possible. Bitcoin has an ability to remove governments, powerful corporations and central banks and instead gives power to the people with direct, instant, peer-to-peer transactions between individuals and businesses alike.
Bitcoin Removes the Trust Factor
Along with empowering individuals and businesses, Bitcoin removes the trust needed in banking and governments. Despite volatility, it isn’t as extremely as currencies such as Venezuelan bolivar or the Salvadoran colón. In a volatile environment, there is no middleman, government or otherwise, so Bitcoin transactions can continue as usual.
While nothing is set in stone, there is a possibility for Bitcoin in Latin America to be the new gold standard for this entire region’s economic development. El Salvador is one of the countries leading the push on Bitcoin, and if their efforts to make Bitcoin legal tender end up successful, it’s easy to see other countries doing the same.
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