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Stablecoin adoption is on the rise, especially in Brazil, Mexico and Argentina.
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Decentralization is becoming an increasingly relevant concept for users.
Stablecoins, self-custody wallets, and cross-border transactions are all topics that are changing the way people interact with their finances. Little by little, people are beginning to find ways to solve key problems, such as distrust of traditional financial systems and the need for more secure and accessible ones.
Latin America is a region that exemplifies this phenomenon very well, standing out as a space where innovations have found fertile ground to develop and respond to local economic challenges.
In this context, a recent study indicates that, for many users, choosing a Bitcoin-criptomonedas-semilla-hardware-seguridad/” target=”_blank” rel=”noreferrer noopener”>wallet Self-custody has become a deciding factor when considering storage options for cryptocurrencies, reflecting a growing preference for tools that offer greater control and security.
Consensys, company established by Joseph Lubin – co-founder of Ethereum – and YouGov, a British company specialized in market research and data analysis, stand out in a report that interest in self-custody wallets is led not only by Africa (81%), the Philippines (69%) and India (65%), but also by Brazil (61%) and Mexico (60%).
The publication points out that, although in most countries less than half of the respondents declare themselves very familiar with the concept of decentralization, when receiving an explanation of it, 37% stated that money transfer systems would improve with their implementation.
Frustration with the traditional financial model reflects a high demand for alternatives better adapted to the practical needs of people, who increasingly feel trapped by a status quo that does not provide solutions. According to the Consensys and YouGov report, 47% of respondents believe that the current financial system needs improvement, while 18% maintain that it should be completely rebuilt.
This phenomenon is also manifested in distrust towards large technology platforms and companies, which, according to 82% of the people consulted, concentrate too much power. Against this backdrop, decentralization, both as a concept and as a practice, offers greater levels of security and privacy, which is especially attractive in regions where traditional economies are perceived as inefficient or corrupt.
Security through self-custody
With the rise of decentralization, challenges emerge in finding a balance between privacy and regulation. Although many practices seek to guarantee the confidentiality of financial transactions, some are exploited by individuals with funds of questionable origin, opening the door to risks such as money laundering. At the same time, Excessive or poorly applied regulatory measures can affect people who only seek to protect their assets or carry out transactions within the legal framework..
In this scenario, cryptocurrencies and solutions such as self-custody wallets offer an ideal answer. By allowing users to maintain full control of their assets without depending on third parties, risks associated with potential security breaches or restrictions imposed by exchanges are mitigated; Furthermore, this approach strengthens the principle of financial independence, since self-custody wallets do not require revealing personal information or identification to carry out transactions.
In America, the highest percentage of Cryptocurrency wallets is registered in the United States, with 43%. Source: Consensys.
According to Consensys data, the United States is the country in America with the highest percentage of users who own cryptocurrency wallets (43%), but It is worth highlighting figures such as those of Brazil (31%), Mexico (27%) and Argentina (16%).
Fast, low-cost cross-border transactions
The rise of cryptocurrency wallets also highlights the importance of stablecoinswhich have emerged as a key tool to optimize cross-border payments and promote financial inclusion. By eliminating intermediaries, reducing costs, and speeding up wait times, stablecoins align perfectly with users’ desire for a more efficient and accessible financial system. It is no coincidence that global giants such as Visa, Mastercard and PayPal already use them to improve the speed and security of international transfers, a process historically slower and more expensive than domestic transactions.
A report Bitso highlights that, although local real-time payment systems, such as SPEI in Mexico, Pix in Brazil and Transferencias 3.0 in Argentina, have shown significant progress, their lack of compatibility with global banking networks limits their ability to facilitate cross-border transactions.
While governments are prioritizing national payment systems such as Pix in Brazil, SPEI in Mexico, and Transferencias 3.0 in Argentina, the reality is that incompatible banking systems create significant barriers to efficient cross-border transactions. These national solutions may excel within their borders, but they do not solve the complexities and inefficiencies associated with international payments.
Bitso report: “How Blockchain technology and stablecoins can transform cross-border payments in Latin America.”
Bitso researchers note that B2B payment fees vary between 1.5% and 2.9%, while remittances can exceed 6% average cost; In addition, the limitation of currencies and the fact that infrastructures only operate during business days can cause delays, especially in the case of international transactions. Nevertheless, With stablecoins it is possible to make instant payments 24 hours a day, 7 days a week, without the need for third parties.
Although projects like USDT and USDC They still represent a small fraction of the global financial system, their levels of use are increasingly high. According to the Bitso publication, in 2023 payments made with stablecoins almost reached USD 7 trillion, with Tether (USDT) accounting for approximately two-thirds of this volume. Both companies and individuals see stablecoins as a key tool to mitigate the effects of inflation and strengthen their purchasing power, especially in countries with very volatile economies.
Stablecoins have taken on many of the roles traditionally held by money, including payments. In some regions, stablecoins function as a digital form of cash, while in others, they power financial markets and services. We have also seen governments and regulators begin to formally recognize stablecoins as a regulated financial asset, with Europe being the first major market to implement a comprehensive, transnational regulatory regime for digital assets, including stablecoins.
Bitso report: “How blockchain technology and stablecoins can transform cross-border payments in Latin America.”
Actors participating in the cross-border payments process: Source: Bitso.
Similarly, Kaiko Research researchers maintain that Latin American users prefer stablecoins over cryptocurrencies like bitcoin. This was captured in a study that analyzes exchange patterns between May 2020 and May 2024 in the region, revealing that 40% of cryptoasset trading is made up of USDT.
It is worth noting that, months before the publication of Kaiko’s work, Circle launched a study about the role that stablecoins are playing in Latin America. According to the report, the region, characterized by its young population and high adoption of financial technologies, is well positioned to lead the transition towards faster and more accessible payment systems. The researchers highlighted that, in 2022 alone, Latin American citizens received more than USD 500 billion in cryptoassets, much of which came through transactions carried out in stablecoins.
Financial inclusion
Circle’s report also highlights how various fintechs and developers in Latin America are leveraging USDC to promote financial inclusion. For example: Mercado Libre has integrated the stablecoin into its platformwhile Airtm, in collaboration with governments and organizations, created communication channels humanitarian aid in Venezuela who used the crypto asset. For its part, Lemon, with almost two million users in the region, facilitates access to USD Coin through its Visa card, and Ripio has cash refund programs with this cryptocurrency.
Although North America was a pioneer in driving the adoption of the original Internet worldwide, Latin America is taking a leading role in the adoption of cryptocurrencies and financial technologies in general. This is due in part to a growing need, as many populations in the region lack access to traditional financial services; In addition, demographics play a fundamental role. With a population of 658 million, almost double that of the United States, Latin America has a population size comparable to that of Southeast Asia, another major hub of innovation in digital finance. A relevant fact is that almost a quarter of its population is 14 years old or younger, which gives the region a key advantage over others with aging populations.
Circle report: “Latin America embraces digital finance and the next era of the Internet.”
Thanks to tools such as self-custody wallets and stablecoins, Latin America is overcoming important economic and social challenges, particularly in a context of economic instability and high inflation. These innovations provide access to safer and more efficient financial solutions, allowing the region to move towards a future of greater economic stability.
Nevertheless, It is essential to promote digital financial education about cryptocurrencies and stablecoinsensuring that users understand how to use them safely; Furthermore, it is crucial to promote balanced regulations that protect people without slowing down innovation, and support local initiatives and success stories to accelerate the adoption process in the region.
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