Cryptocurrencies are digital assets based on blockchain technology, they are stored in addresses where only the person who has the digital key can access and mobilize said funds. These digital funds allow any user with an Internet connection to access an account and from there they can pay, collect and transfer funds anywhere in the world, at any time. Blockchain technology has become an industry that generates more than 170 billion dollars in the world.
Could it be an alternative solution for some Latin American countries?
Due to the recent economic crises that affect some Latin American countries, many citizens of these affected countries (who go through inflationary processes or who do not trust traditional banking) have adopted the use of cryptocurrencies to protect themselves from the rapid devaluation of their respective local currencies, this due to the economic mismanagement of their respective governments.
The Chainalysis Report
In the report called Latin America mitigates economic turbulence with cryptocurrencies, the importance in the implementation of the use of cryptocurrencies to combat inflation is highlighted. The report performs an analysis of the trends of some cryptocurrencies in Latin America, between July 2019 and June 2020, showing that the difficulties in accessing the traditional banking system and remittances are making the use of cryptocurrencies viable. The report mentions that not only do Latin American businesses have problems with banks but also many people do not have access to bank accounts, which is considered as another factor that would be driving the use of cryptocurrencies.
The devaluation of the local currency has driven the adoption of cryptocurrencies
Likewise, the report mentions that the instability of local currencies has been a long-standing problem in Latin America, which is another influential factor that decisively pushes towards the adoption of cryptocurrencies in Latin America. The conclusive analysis of the report indicates that the volume of peer-to-peer exchanges (P2P) shows us to what extent the devaluation of the local currency has driven the adoption of cryptocurrency in several Latin American countries. Users from countries such as Venezuela, Argentina, Colombia, Uruguay, and Chile, among others, increasingly resort to the use of cryptocurrencies, as a means of storing value, especially when they see that their local currencies are losing value due to inflationary effects. In our previous article entitled Millennials: the largest users of cryptocurrencies we explained that although little is known about users, it was possible to know what they have in common and how their payment behavior is, we also learned the reasons why they have decided to use cryptocurrencies
What do you think about this topic? Do you think that cryptocurrencies can be a solution to the inflation problem in Latin America?
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