Stablecoins Become Lifeline for Citizens in LatAm Grappling with Economic Instability

Stablecoins like USDT have become a key financial tool in Latin America that helps citizens navigate persistent economic volatility, according to Chainalysis’ global adoption report.

Stablecoins, particularly those pegged to the US dollar, have emerged as a critical financial tool in Latin America, offering a hedge against inflation and facilitating transactions in a region grappling with persistent economic volatility. This is according to the latest global adoption report by blockchain data platform Chainalysis.

Highlighting the region's growing crypto adoption, Chainalysis noted that Latin America received nearly $415 billion in cryptocurrency between July 2023 and June 2024, placing it slightly ahead of Eastern Asia in overall crypto activity despite lower adoption rates.

Argentina led the region in crypto value received, with $91.1 billion, closely followed by Brazil, which received $90.3 billion. Notably, Brazil has seen a renewed wave of institutional activity, with a 48.4% increase in high-value transactions between the fourth quarter of 2023 and the first quarter of 2024.

The report also underscored the role of stablecoins in the region, particularly in countries like Argentina and Brazil, where local currencies have sharply depreciated against the US dollar. Stablecoins have provided a crucial mechanism for citizens to protect their savings from inflation.

For instance, Argentina's inflation rate soared to 143% in 2023, prompting many to seek alternative ways to preserve their savings as the Argentine peso (ARS) continued to depreciate.

According to the report, the use of stablecoins surged, especially following the implementation of “shock therapy” economic measures by newly elected President Javier Milei, which led to a 50% devaluation of the ARS.

Data from Bitso, a leading regional exchange, indicated that stablecoin trading volumes spiked after key economic events. For example, when the ARS fell below $0.002 in December 2023, stablecoin trading volumes on the exchange surpassed $10 million the following month.

Argentina's heavy reliance on stablecoins is further evident in its 61.8% share of the region's stablecoin transaction volume, outpacing Brazil's 59.8% and the global average of 44.7%.

Meanwhile, Brazil has seen a significant resurgence in institutional crypto activity after a temporary decline in early 2023.

According to the Chainalysis report, the country experienced a 29.2% increase in institutional-sized transactions — those over $1 million — between the last two quarters of 2023, with an additional 48.4% jump between the fourth quarter of 2023 and the first quarter of 2024.

Experts largely attribute this recovery to the approval of Bitcoin and Ethereum ETFs by the U.S. Securities and Exchange Commission (SEC) in January, which sparked interest in digital assets among institutional investors.

The report also highlighted the involvement of major financial institutions in Brazil's crypto market, including the entry of global players like Circle, which launched its USDC stablecoin in the country in May.

This increased interest is further supported by Brazil's forward-thinking regulatory environment, with initiatives like the Drex pilot program — a hybrid central bank digital currency (CBDC) platform — drawing attention globally.

As Latin America's crypto markets continue to evolve, stablecoins are poised to play a crucial role in providing financial stability, particularly in countries facing high inflation and currency devaluation.

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