Latin America Is Mainstreaming Crypto
In the early 2010s, the dominant organizational paradigm for the Internet was still Web 2, where social platforms gathered users’ personal information, mapped their social networks, and began to create value connecting the offline with the online. At the time, the way users accessed this organizational paradigm was undergoing a dramatic shift: from mostly stationary, larger-screened hardware to the ubiquitous small screens we now carry around with us wherever we go. Social networks had to figure out how to make their business models work for mobile devices, especially as global populations connected for the first time wirelessly. In this rush for global eyeballs, an opportunity was created for mobile newcomers to wrest first-mover advantage away from the more established social players.
And so rose the messaging apps. Then-new players like WeChat and Whatsapp offered mobile users free instant messaging and beat many of the established social apps to mapping the world’s social networks. Mobile + messaging-as-social presented further opportunities for value creation, and messaging apps quickly became the dominant online platform for online and offline commerce, digital payments, and on-demand services. It was arguably in the Asia Pacific region where the mainstreaming of mobile messaging-as-a-platform created the most commercial innovation.
It was also around that time that the pseudonymous Satoshi Nakamoto published his paper on Bitcoin, the first cryptocurrency. Bitcoin promised to usher in a new age of libertarian, decentralized finance, but has so far mostly solidified as an alternative investment asset to help further grow the relatively wealthy’s portfolios. However, Bitcoin also inspired the creation of numerous other cryptocurrencies, including Ethereum, the leading platform contender for the still-nascent decentralized web, or “Web 3.”
And while Web 3 as an organizational paradigm for the Internet is still being constructed, we are seeing Latin America specifically breathe new life into crypto as originally imagined. Much as Asia did with messaging-as-a-platform in the 2010s, Latin America is mainstreaming crypto in the 2020s.
For example:
Chainanalysis estimates that cryptocurrency usage in Latin America has grown 880% from June 2020 to July 2021.
Deel estimates that employee wage payments in cryptocurrency are growing at 10% monthly, with 52% of payments to Latin American workers on the platform being in the form of crypto.
Chainalaysis also estimates that Latin Americans abroad have sent 3x the amount of crypto as remittances in 2021 as in 2020.
A survey commissioned by Visa shows that 30% of SMB merchants in Brazil plan to accept payments in crypto, versus 19% in the United States and 8% in Canada.
Of course, not everything is going swimmingly. El Salvador famously made Bitcoin legal tender in September 2021 and has launched a number of initiatives around cryptocurrency adoption. Results so far have been mixed:
Only about 50% of the population has the ability to access cryptocurrency online.
Only 10% of Salvadorans fully understood the mechanics of cryptocurrency.
Only 3.6% of business owners agreed Bitcoin helped their sales.
But these results should not be suprising to anyone who has spent time in technology, innovation, or venture investing. Top-down approaches to innovation rarely work.
Instead, it is the bottom-up, naturally incentivized growth in cryptocurrency usage that will make it a success in Latin America. In the same way that messaging apps took advantage of carrier fees and the local nascency of established foreign social platforms to supercharge their growth, Latin America’s historical currency volatility has opened the floodgates for crypto in the region.
While the killer app for crypto to date in the global North has been as an investment asset, and in the future may be as a development platform, Latin America is a test-case in crypto as it was imagined: a trusted, decentralized currency. One, by the way, that isn’t subject to middlemen and their fees nor to inflationary pressure, but instead actually has the promise to grow rather than diminish in value over time.