Stablecoins are used to fight devaluation and inflation in Latin America

According to Chainalysis, a crypto auditing and blockchain tracking company, the use of stablecoins pegged to the dollar is on the rise in Latam, specifically Argentina and Venezuela, due to the common economic problems the two countries are facing. 34% of “small“transactions include stablecoins in Venezuela, and 31% of them in Argentina, as citizens seek protection from devaluation and inflation.

Chainalysis report finds stablecoins useful for Latam countries

Although criticized by many, stablecoins are becoming an important part of the crypto-currency market activity in some countries. The latest report from Chainalysis, a crypto-currency research and blockchain monitoring company, revealed that a significant portion of transactions in Argentina and Venezuela include stablecoins.

The report, which focuses on the use of crypto-currencies in these countries, determined that 34% of small transactions, under $1,000, include stablecoins in Venezuela. Similarly, 31% of these transactions include stablecoins in Argentina.

The difference in usage pattern when comparing the Latam region to other regions is related to the economic peculiarities presented by countries like Argentina and Venezuela, which are facing record levels of inflation and devaluation of their fiat currencies.

Sebastian Serrano, CEO of Ripio, a crypto-currency exchange based in Argentina, believes stablecoins are popular because they offer a digital dollar hedge. He explains:

That’s why stablecoins are used so often, because they are a good digital alternative to storing physical dollars.

Circumstances and restrictions

While the Venezuelans have already gotten rid of their exchange controls, the Argentines still cannot buy dollars. In addition, there are different exchange rates for different uses of the dollar in Argentina. Recently, the government introduced two new exchange rates, called Qatar and Coldplay, because of their specific applications. This makes the stablecoin proposal more attractive, allowing citizens to bypass these controls by using these digital dollars.

However, Argentina and Venezuela are not the only countries relying on stablecoins to transfer value. Brazil, one of the continent’s largest economies, also has a high level of use of stable currencies. According to figures presented by the Brazilian Tax Authority corresponding to the month of August, two stablecoins, USDT and USDC, were in the top 5 crypto-currencies used to move the most volume. Specifically, USDT was used to move $1.4 billion in 79,836 transactions, with an average amount of almost $18,000 per transaction.

Stablecoin Trends Mobile Institutions

This reliance on stablecoins and the circumstances surrounding it are driving institutions to offer services that use stablecoins as a way to save and earn a return. One such program was launched by Bitso, a Mexican crypto-currency exchange, in May. Under the program, called Bitso+, the exchange offers returns of up to 15 percent in stablecoins. Bitso’s initiative has been well received by its customers, registering more than 1 million customers in the program since its launch.

Offering products to fight inflation and enable crypto-currency use cases in other areas is key to the exchange’s strategy, as Santiago Alvarado, vice president of product at Bitso, said. He explained:

We are proud to see the role that Bitso is playing in Latin America by developing new products based on crypto-currencies and tailored to the needs of our customers, such as payments, returns and support against inflation.

Bitso and Ripio also announced the development of crypto-currency-based credit cards in August, allowing its customers to save in crypto-currencies and stablecoins and spend their savings in stores where crypto-currencies are not yet accepted, expanding the use of these tools.

In Brazil, Smartpay will also include the service of Tether. USDT in more than 24,000 ATMs, to allow more customers to safely exchange their stablecoins for fiat currency.