Cryptoasset Ecosystem Booms in Latin America and Caribbean: Study
The Inter-American Development Bank (IDB) and the Cambridge Centre for Alternative Finance (CCAF) have jointly released a report that provides growing trends in the cryptocurrency industry in Latin America and the Caribbean.
Latin America and the Caribbean have shown “substantial growth” in the sector, the study notes, adding that crypto-related business operators in the region have doubled since 2016.
The study surveyed 52 private sector companies and public institutions in the region between June and August 2022, highlighting that the crypto ecosystem has experienced a positive trend from 2020 to mid-2022.
“The rapid pace of change in the cryptoasset ecosystem has increased the urgency for greater understanding and cooperation among public and private stakeholders to ensure that the industry’s development is sustainable, consumer protection is robust and policymaking is evidence-based,” said Bryan Zhang, executive director and co-founder of CCAF.
More than 170 digital asset firms were serving in the region in 2022, and almost 100 of them were headquartered in Latin America and the Caribbean, the report confirmed.
Particularly, Argentina, Brazil and Mexico are frequently served by digital asset firms, it added. Other common options for crypto business expansion include Colombia and Chile.
When it comes to regulators in the region, most “believe cryptoassets are useful in creating a more inclusive financial services landscape.”
Among the 31 public sector respondents surveyed, only 7% deemed cryptoassets as “useless” and almost 80% said that the asset class offers new functions complementary to traditional banking.
Anderson Caputo, chief of the IDB’s finance division says the industry has the potential to be a “game-changer” for financial inclusion in LatAm and the Caribbean.
“By providing new opportunities for payments infrastructure, cross-border payments, digital identity, and other services, cryptoassets could help to bring financial services to those who are currently underserved.”
Further, crypto players and regulators in the region are willing to have a consensus on the industry to shape a safe and innovative ecosystem. They also stressed the need for clear regulatory frameworks.
Private sector respondents noted that adding corporate clients and expanding decentralized finance (DeFi) services have been the main growth opportunities.
However, regulators are not likely to implement DeFi regulations soon. “Almost half the responding regulators do not plan to implement DeFi regulation in the 5 years.”