Pre-pandemic, cryptocurrency had already begun to skyrocket in popularity as well as value, however, long periods of lockdown in conjunction with more free time has allowed demographics the likes of which were unable to previously research and get involved with crypto to understand the phenomenon, driving prices and popularity even higher. It is possible that you are not familiar with the concept, and in as few words as possible, a cryptocurrency is a digital currency that is coded specifically to ensure the encryption of data and security of any transfer. These currencies are volatile as many holders use them as investments as opposed to a source of payment, yet, with more traction in mainstream society, this could become a changing habit in the years to come as industries expand their methods to facilitate the use of crypto payments.
Speaking of more mainstream applications that could eventually become commonplace in the world of crypto, Latin America is fast becoming a region where innovation and pioneering developments make it hard to ignore. For this reason, we will be looking at a couple of examples of how different nations are implementing cryptocurrency into daily transactions, the likes of which may eventually represent pioneering efforts to change the face of global capital transfer.
To provide a little bit of background, it has been said that Latin America is making use of the potential that exists within cryptocurrencies because of the volatility of many local economies and inflation rates. This is interesting as, in conjunction with the rapid nature of the transfer of currency implied with this form of payment, could there be the potential for faster recovery in the region? Perhaps our two examples can help you decide the answer to this question, starting with El Salvador before moving on to Venezuela.
Last month, on the 7th September 2021, legislation was passed that made Bitcoin (BTC), a legal form of payment, the first country in the world to do so. The main currency in the country has been the US Dollar, making this an interesting move as the Dollar is one of the more stable currencies on the global stage. It could therefore be interpreted that this is a move for the future, exemplified by the promise of US$30 in BTC for each resident that downloads Chivo, their application designed to be a crypto wallet.
As we mentioned, cryptocurrency is not stable, yet it does have its advantages, such as the decentralised nature of the transactions making them more secure than any other method previously accessible to anyone, wherever they find themselves in the world. Therefore, it is possible that this move, alongside the use of standard currency in the US Dollar, could help to promote wider uses of crypto in everyday life, though it is taking time for people to get used to it in El Salvador, and as many people do not have a bank account, it will take time before the real benefits of this move to become evident.
The implementation of Bitcoin in Venezuela is perhaps a little different. To combat the hyperinflation taking place in the nation, the government have decided to use the cryptocurrency to try and find stability. One interesting thing to note in this instance is that any country with economic problems, should this work in Venezuela, may be able to limit the possible extent of economic recessions by leaning on crypto as a backup. Citizens are able to convert their current savings and currency into Bitcoin, and as we have mentioned a couple of times that the currency is volatile, it is not more volatile than the Venezuelan Bolívar, perhaps making this a more positive move than that of El Salvador where people are still unsure. However, what remains is that Latin America is taking the plunge with forward-thinking legislation which perhaps may pave the way for development in the industry around the globe in the near future.
So, if you are interested in finding out more, get in touch with us today! At Creimerman, we are a team of global citizens, working with each client and providing a tailor-made service in order to help make their cross-border ventures a success, and we would love you to be the next.