Latin America: Cryptocurrencies in Developing Countries

2017 was a year of global changes. While feminism and immigration became a regular topic within sociopolitical discussions, in economics, especially in the Latin American sphere, the debate was set around a revolutionary kind of technology: cryptocurrencies like Bitcoin.

No country or world region is exempt from the global phenomenon of Bitcoin or similar cryptocurrencies. However, while world powers see the topic as a big national security problem, developing markets are facing an amazing opportunity for growth. In that spirit, like in Africa, Latin America is an interesting case study of the influence of this financial trend.

Bitcoin and Small Businesses

Ernesto Terrinquez, Mexican local bank director for the globally known Indra Consultancy, explained that Mexican small to medium size companies have started to use Bitcoin as a payment method for person-to-person sales. Indra’s representative suggests that the lack of regulation in private transaction is beneficial for this market.

Beyond Mexico, all of Latin America, as any other developing region, is known for its high levels of corruption and its slow bureaucratic institutions. Hispanic and Brasilian startups have found a faster and cheaper paying alternative in cryptocurrencies within a system that wasn’t constructed to promote business entrepreneurship.

Traditionally, startups’ funding was limited to loans or external investments. But this new paradigm of Bitcoin and Blockchain brings a whole new scale of digital alternatives for small companies: from mining cryptocurrencies to innovative ways of doing crowdfunding.

In the context of countries such as Venezuelan, where a controlled economy has made it impossible to legally acquire formal currencies, cryptocurrency has become a way to overcome the complicated policies of exchange that are controlled by Nicolas Maduro’s administration.

Important Cryptocurrency Projects in the Region

Although it may seem paradoxical, one interesting currency project is led by the government that’s been actively screwing with the economic growth of Venezuela. As a solution to get over what some analysts have considered an undercover embargo from the US, Maduro’s administration has put a plan into place to create a national oil-backed currency called Petro.

This dusty Fintech proposition is the evolution of the frustrated dream of Hugo Chávez Frías, late ex Venezuelan President, to promote the use of an electronic trade currency among the members of ALBA. Once thought to be an alternative to fight US$ dominance, it’s now a safeguard for a country that is becoming isolated.

The reinvention of Chávez’s project, plus its adaptation to a blockchain system, is not only a curious move that might affect Venezuelan economy but an enterprise that the world watches carefully. A positive result might be the precedence for a complete integration between cryptocurrencies and world banks.

Following Maduro’s plan, the rest of Latin America has also understood the importance of Bitcoin and other cryptocurrencies. That’s why, from Mexico to Argentina, banks have opened their eyes to the important implications of the blockchain economy, leading the discussion for the regulation of the cryptomarket.

Sadly for Bitcoin investors, these likely regulations may be risky for their businesses. Whereas some positions within parliaments are friendly, others are focused on the total control of what has always been a free and open digital market.

Cryptocurrencies: Cybersecurity and Regulations

For Mexican enthusiasts of cryptocurrencies, this year will be decisive, since the first Fintech law of Latin America is going to be approved in their country. During the discussion of the law, the perhaps most polemic topic has been cryptocurrency reliability.

The fact is that this kind of e-money is not trustworthy. Not because of its volatility, but for its historical links with electronic crimes. Since the very beginning, delinquents has been watching cryptocurrencies closely. It’s always been a traditional currency in the black market and an important focus for digital criminals and hackers.

Especially in Latin America, where piracy and scamming is a major concern, it’s not surprising to see so many banks refusing to open to cryptocurrencies.

That’s why, despite the level of penetration that cryptocurrencies are gaining in the Latin World, governments on the continent seem to stay very skeptical and, in some cases, defensive. For Latin American crypto-exchangers it’s important to keep in mind that, even if regulations are still complicated for most nations, it’s an issue that world banks are working on.

The Future for Cryptocurrencies like Bitcoin in Latin America

Although the cryptocurrency trend in Latin American is not as popular as in the US or the EU, the regional digital markets are evolving and adapting to the global trends. While startups embed Bitcoin and Etherum into their finance and business models, banks and governments are seeking to understand how to control this growing sector.

No matter what the results are, it will be very interesting to see how this Fintech will influence the developing region.

About Alejandro Pérez Morales

Alejandro Pérez Morales, as a professional, can be split into three different faces: a Venezuelan young Bachelor in Mass Media that has precociously put himself into the competitive and innovative world of marketing and content production, a frustrated painter and writer that is passionate about humanities, and a fervent lover of social organizations and political issues. A triad of interests that define everything he communicates.

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