The use of cryptocurrencies such as Bitcoin (BTC) is increasing, especially in Latin America, where several countries are in the top ten of users. El Salvador was the first country in the world to adopt BTC as legal tender in June 2021. This movement has led Kimberly Rosales, an entrepreneur and cryptocurrency expert, to further study this space as legal tender in this region of the world, explaining through it, its growth.
According to Statista surveys, the fourth, fifth and sixth-highest rates of cryptocurrency use in 2020 were recorded in Peru, Argentina and Chile, with percentages of use by the population of 16%, 14%, and 12%, respectively. According to this ranking, Mexico is in the ninth position, where 10% of respondents stated that they owned or had used cryptocurrencies during that year.
Cross-border trade is one of the key advantages of cryptocurrency. Large transactions, which would normally require banks to pay thousands of dollars in commissions, can be completed quickly and at a fraction of the cost. Despite all the advantages, it is important to remember the importance of regulation in order to prevent money laundering and ensure fair competition.
In addition, thanks to the use of applications such as Blockchain, end-to-end tracking of transfers are possible, as exchange rates are public information and allow for greater agility by operating in real-time.
“With the depreciation that some Latin American currencies have suffered due to the economic crisis derived from the pandemic, consumers see virtual money as an alternative to safeguard the value of their savings,” explains Rosales. “In fact, BTC is the digital currency with the most widespread use in Latin America.”
Rosales found that Colombia is the Latin American country with the most extensive network of ATMs that operate with cryptocurrencies, counting 46 ATMs located in Bogota, Medellin, Cali, and Cucuta, among other cities. Argentina has thirteen cryptocurrency ATMs, most of them in the city of Buenos Aires. Mexico has ten; four in Mexico City.
Skeptics fear that the rise in cryptocurrency could jeopardize the sovereignty of countries’ monetary systems. This is a possible outcome in the future. However, cryptocurrencies don’t currently have enough money to cause this destabilizing effect.
Josh Lipsky, director at the Geoeconomic Center of international analysis group Atlantic Council, stated in an interview that he believes governments will soon create their own digital currencies to compete with cryptocurrency. This sector will eventually be regulated.
El Salvador was the first country to adopt BTC in parallel to the dollar during the middle of the last year. This bill was proposed and implemented by President Nayib Bukele within just 90 days.
This law will be adopted because it has the potential to allow Salvadorans to send money home. The president stated that this law will generate short-term jobs and encourage financial inclusion for thousands of people who are not in the formal economy.
The approved norm establishes that all prices may be expressed in BTC and all tax contributions may be paid in the cryptocurrency. However, for accounting purposes, the dollar will be maintained as the reference currency.
The new legislation offers freedom to the population to use one or the other currency but requires the acceptance of BTC as a form of payment. Still, the main criticism of the project is undoubtedly the great volatility that characterizes BTC.”
El Salvador was holding talks with the International Monetary Fund (IMF) for a nearly $1 billion program. But Gerry Rice, IMF spokesman, during a press conference stated, “The adoption of BTC as legal tender raises several macroeconomic, financial and legal issues that require very careful analysis.” This clouds the prospects of getting such a program while widening the country’s bond spreads.