Amid economic uncertainty, LatAm found some security in the Bitcoin as its use rose 1,747% during 2015. Why is the region so eager to get into cryptocurrencies?
It has been said not once or twice, but several times: Latin American economies had a woeful 2015, and the prospects for 2016 aren’t much better. However, making that statement is always in order when analyzing economic trends in the region. As is the case with this, the surging popularity of the Bitcoin (a decentralized virtual currency) in LatAm over the last year. The recession permeates every aspect of the regional economy, as people and businesses find ways to ease the turbulence.
The Bitcoin comes into play as one of these measures, and its adoption has reached new levels incredibly fast. When comparing the number of transactions done at the start of 2015 to those at the end of the year the initial perception might be that the Bitcoin entered the region to stay.
The numbers for 2015 are as follows: Merchant transactions using BitPay (a Bitcoin payment processor) rose 510%, Total merchant transactions in the region augmented by 1,747%, Brazil saw an increase of 322% in Bitcoin trades and a 461.4% rise in Bitcoin wallet adoption and in Mexico total Bitcoin exchanges grew by 600%. Staggering figures, especially when considering they took place over the course of a year.
The reasons behind the trend might be related to the following set of numbers: The Bitcoin performed 400% better than the Venezuelan Bolivar, over 92% better than the Brazilian Real, over 65% better than the Mexican Peso and over 41% better than the Argentine Peso.
Insight into the topic could stop there, as the relationship may seem clear already. However, this would be to ignore several other factors that make the Bitcoin an increasingly popular currency, besides its ability to retain its value.
For starters, the recession has led several countries to reach higher levels of inflation as the IMF predicts 720% inflation rate in Venezuela by the end of 2016 and one as high as 38% for Argentina, with similar numbers in other recession stricken countries. This has incentivized governments to tighten up on their monetary policies, for example Brazil, which has imposed new taxes on payments going out of the country, which include remittances and travel expenses, all that besides the several days it can take to officiate these processes.
The Bitcoin then, comes in as a way to bypass many of the restrictions imposed by government, as well as the difficulties that local currencies have in the face of recession.
The Bitcoin, initially serves as a way for the regular Latin American consumer to make purchases and payments abroad without having to face costly exchange rates, facilitating web-based shopping throughout an increasingly large number of retailers that accept Bitcoin as form of payment.
Along the same vein, the Bitcoin allows transnational companies operating in LatAm to pay providers and employees while skipping the aforementioned hurdles.
The Bitcoin also offers an interesting alternative for investors coming into LatAm, as government place tighter seals on currency exchanges, the Bitcoin, which is intended to work globally, can facilitate large payments coming from abroad.
However, a complete Bitcoin revolution is yet to happen, and might not take off for at least a few years. The small number of e-wallet providers and Bitcoin exchangers makes it difficult for the average citizen to get reasonable rates for online currency services. Regionally, only Mexico and Brazil can count on their own exchangers, while all other Latin American countries have to resort to exchangers abroad.
Additionally, the anonymity and lack of oversight over transactions in Bitcoin form generates insecurity among some decision makers, especially in countries where money flows are closely monitored by government agencies. Such is the case in Venezuela and Ecuador, the latter of which already outlawed the Bitcoin, but encouraged the implementation of their own central bank controlled electronic currency, which already is an up and running banking service.
Still, other governments reacted more enthusiastically to the growing popularity of cryptocurrencies. 2016 will see the third reiteration of the Latin American Bitcoin Conference, this year hosted by Mexico, where countries come together to discuss further measures for adoption, and in Buenos Aires, with Mauricio Macri as mayor, the city hosted its first Bitcoin Forum, where guest speakers, experienced in the topic argued its full implementation in Argentina.
The upsides for going all in for the Bitcoin are clear, but the downsides are just starting to show themselves. Although certainly LatAm seems like a region ripe for a Bitcoin takeover, as the figures seem to show, the roadblocks to full implementation have to be bypassed first. Necessity has brought the Bitcoin this deep into LatAm, now only the interest of citizens and governments can make it stay for good.
LatinAmerican Post |