Source: Chainalysis; Compilation: Deng Tong, Golden Finance

Latin America is the fifth largest region we studied, accounting for 9.1% of the value of cryptos received from July 2023 to June 2024. During this period, the region received nearly $415 billion in cryptos, slightly higher than East Asia.

Centralized exchanges (CEX) are the most commonly used services by people in Latin America, accounting for 68.7% - slightly lower than the CEX usage rate in North America. The regional trading value in Latin America is mainly driven by institutions and professional investors (entities with transaction amounts exceeding $10,000).

Latin America is the second fastest growing region we studied this year, with a year-on-year growth rate of about 42.5%. As we will discuss later, this growth is largely driven by the strong but diversified crypto markets in Venezuela, Argentina, and Brazil.

In terms of the value of cryptos, Argentina ranks first in the region, estimated at $91.1 billion, just slightly above Brazil's $90.3 billion.

In our global adoption index, four of the top 20 countries are in Latin America: Brazil (9), Mexico (13), Venezuela (14), and Argentina (15). As we will detail below, remittances based on stablecoins are becoming increasingly popular in these countries and throughout Latin America.

Brazilian institutions' crypto activities indicate a renewed interest among major financial institutions.

In last year's Geos report, we noted that despite Brazil's historically developed institutional crypto market, institutional activity declined at the beginning of 2023, possibly coinciding with a global crypto bear market. However, this trend reversed in the middle of the year and increased thereafter, indicating a renewed interest from major financial entities. For example, the monthly value of institutional-scale trades (i.e., over $1 million) increased by about 29.2% between the last two quarters of 2023 and by about 48.4% between the fourth quarter of 2023 and the first quarter of 2024.

We interviewed André Portilho, the digital assets director of investment bank BTG Pactual, to learn more about the factors driving activities within the institution. 'One key factor is portfolio diversification, especially as the market matures. Investors are increasingly incorporating digital assets into their asset allocation strategies, considering them as valuable alternative investments with the potential to enhance returns. The integration of Bitcoin and other cryptocurrencies as established investment choices is crucial in this transformation,' he explained. 'The significant recovery in the activity of Brazilian crypto asset institutions can be partially attributed to evolving regulations and US institutions entering the cryptocurrency market, particularly with the launch of Bitcoin and Ethereum ETFs.'

Founder of the Brazil Crypto Report Aaron Stanley explores the latest trends in the Brazilian crypto ecosystem through a newsletter and podcast. He notes similar trends as Brazil embraces crypto. 'The ecosystem has become quite mature. We have seen several TradFi banks launch crypto brokerage products (such as the country's largest bank Itaú), with most other major banks actively building their similar products. We see major global exchanges like OKX and Coinbase struggling to launch in the country, supported by local teams and entities. The Drex pilot program is a hybrid CBDC/smart contract platform being developed by the Brazilian central bank, also driving TradFi banks to be more forward-looking in their digital asset strategies. This has downstream benefits for these institutions and their clients in crypto adoption.'

With the flourishing crypto activity in Brazil, we conducted a detailed analysis of the most popular assets among Brazilians. Initially, we found that Bitcoin trading saw the most growth during the research period. From September 2023 to March 2024, the value of Bitcoin trading experienced a particularly sharp increase, possibly coinciding with the SEC's approval of a Bitcoin ETF in January 2024. It is also noteworthy that during this period, the price of Bitcoin almost doubled, which may have contributed to the rise in Bitcoin trading volumes.

Upon closer observation of this Bitcoin activity, it is evident that Brazilians receive significantly higher values from global exchanges compared to regional local exchanges.

However, there is a stark contrast in the asset types traded on local exchanges. As shown below, stablecoin trading volume on local exchanges increased significantly by 207.7% year-on-year, surpassing Bitcoin, Ether, and altcoins. Stanley points out, 'Many exchanges and fintech brokers in Brazil offer their clients stablecoins pegged to the US dollar, aiming to provide USD exposure as a value storage mechanism. This has undoubtedly caught people's attention, but currently, the primary use case for stablecoins seems to be in B2B cross-border payments.'

Currently, stablecoins account for approximately 70% of the indirect flow of volume from local Brazilian exchanges to global exchanges. The high level of stablecoin activity in Brazil, along with the widespread interest in digital products and services, has attracted significant interest from major cryptocurrency participants, especially Circle, which announced its official launch in Brazil in May 2024. A Circle spokesperson stated, 'Circle's involvement in Brazil has increased due to regulatory certainty that encourages innovative policies and measures, with more favorable business rules expected to be established in the near future. We are partnering with leading regional enterprises to launch digital asset products, providing Brazilian users with nearly instant, low-cost, 24/7 access to USDC, and enhancing our local business to reach a wider user base. Due to our commitment to the region and existing partnerships, the number of users trading with USDC in the region has grown exponentially.'

So, what does the future hold for Brazil's evolving cryptocurrency landscape? As pointed out by Stanley, Brazil's overall economy may still pose obstacles to mainstream adoption. 'Economic growth is slowing; the Brazilian real (BRL) has depreciated significantly against the US dollar this year; concerns about increasing taxes persist. The middle-class consumers and households face significant debt burdens. In short, in such a vast country, disposable income is not as plentiful as people expect.' However, there are still opportunities for cryptocurrency growth, especially when regulators open up to the technology. 'They view it as a tool to be leveraged, not a threat to be suppressed. Well-regarded regulatory frameworks should provide a stable foundation for the crypto economy in the coming years,' concluded Stanley.

Stablecoins have provided a path to stability during Argentina's prolonged economic turmoil.

Argentina's struggle with hyperinflation and the long-term devaluation of the Argentine peso (ARS) for decades has led many citizens to seek alternative solutions to protect their savings and ensure a more stable economic future. Unfortunately, this year Argentina's economic situation is particularly unstable. By the second half of 2023, the inflation rate was around 143%, the value of the Argentine peso plummeted sharply, and a quarter of Argentinians live in poverty. In December 2023, the newly elected President Javier Milei announced a 50% devaluation of the Argentine peso, describing it as a 'shock therapy,' and the government will cut energy and transportation subsidies.

To shield themselves from the impact of this economic crisis, some Argentinians have turned to the black market to purchase foreign currency, most commonly the US dollar (USD). This 'blue dollar' is traded at a parallel unofficial exchange rate, typically purchased through secret exchange points nationwide known as 'cuevas.' Others have explored stablecoins pegged to the USD, as reflected in our data.

We examined the monthly stablecoin trading volume on the Latin America's leading regional exchange Bitso in ARS, finding that the devaluation of the peso continued to drive an increase in monthly stablecoin trades. For instance, when the value of the ARS fell below 0.004 USD in July 2023, the monthly stablecoin trading volume skyrocketed to over 1 million USD in the following month. Similarly, when the value of the ARS fell below 0.002 USD in December 2023 (following President Milei's announcement), the stablecoin trading value exceeded 10 million USD in the next month.

It comes as no surprise that Argentina's stablecoin market leads in the Latin America region. Argentina's stablecoin trading volume share is 61.8%, slightly higher than Brazil's share (59.8%), and far higher than the global average (44.7%).

In addition, the growth rate of the value of stablecoins received in Argentina's retail-scale (i.e., transactions of less than $10,000) is faster than that of any other asset type, once again highlighting the Argentines' view of stablecoins as a means to mitigate inflation and currency devaluation. Their interest in stablecoins underscores the role of cryptos in unstable markets and how citizens can better control their financial future by accepting cryptos, regardless of official currency policies.

Despite the uncertainties surrounding the Maduro regime, Venezuela's adoption of cryptocurrencies remains strong.

Venezuela's relationship with cryptocurrencies has been tumultuous, marked by experiments such as the introduction of the state-backed Petro (PTR) in 2018 and its subsequent abrupt termination in 2024. PTR is a stablecoin backed by Venezuela's oil and mineral wealth. Venezuela also cracked down on Bitcoin mining and blocked access to certain mainstream crypto exchanges. Concurrently, as the Maduro regime seeks ways to bypass economic sanctions, its illicit oil trading has become intertwined with cryptocurrency trading, leading to high-profile prosecutions by the US Department of Justice. These cryptocurrency-related events highlight a broader shift, where the Maduro regime uses them as a tool of corruption, while citizens see them as a means to ensure financial independence.

However, despite this turmoil, the Maduro regime has recently hinted at a renewed interest in cryptocurrencies without providing specific plans. Regardless of how such political developments unfold, Venezuela remains one of the fastest-growing cryptocurrency markets in Latin America, with a staggering 110% year-on-year growth that surpasses any other country in the region.

What is driving this growth? Firstly, the people in Venezuela seem to be attracted to cryptos, in response to the sharp decline of the Venezuelan bolívar (VES). As shown below, there is a strong inverse relationship between the VES price in USD and the value of cryptos received monthly. Numerous media reports confirm this, indicating that ordinary Venezuelan citizens continue to seek stable value storage means and hedge against the country's economic crisis.

DeFi is another aspect of the growth of cryptos in Venezuela. Since 2022, centralized services have accounted for most of the value received in the country. However, there is an increasing interest in DeFi, especially evident by the end of 2023.

Although centralized services have remained the most popular so far this year, the growing market share of DeFi will soon become an area of interest in the country. If the Maduro regime explicitly supports crypto innovation, this growth may further accelerate.

Cryptocurrency activity in the Caribbean region has accelerated after the collapse of FTX.

In the years following the collapse of FTX, the crypto ecosystem in the Caribbean region went through a period of uncertainty, and activity slowed down due to weakened trust in crypto platforms. However, starting from the end of 2023, the Caribbean region has witnessed a revival of crypto activity. Users seem to be shifting towards mainstream centralized exchanges (CEX), such as Coinbase and Binance.

We interviewed David Templeman, a specialty finance investigator at the Cayman Islands Financial Investigation Bureau, to learn more about how cryptocurrency activities in the Caribbean region are changing. Specifically, in the Cayman Islands, Templeman pointed out that "the number of overseas clients seeking to establish legal entities in the Web3 and blockchain fields has significantly increased compared to recent years. These projects typically involve Layer 1 or Layer 2 and have a wide range of applications, from ai, cross-chain infrastructure, games, and data/cloud storage."

As Templeman summarized, "The aftermath of various collapses (FTX, TerraUSD/Luna, Celsius Network, and Three Arrows Capital) has put pressure on the industry to learn from its mistakes and establish better supervision and guardrails. There is a strong community on the island composed of blockchain and Web3 companies, all of which are physically present and legally registered here." Cryptocurrency activities in the Caribbean region seem to be thriving once again, consolidating the region's status as a key hub to be adopted in the coming years.