Market analysis

Cryptocurrency: the unsung hero for developing nations?

5 min read

As developing nations face increasing economic problems, many countries are turning to cryptocurrency to combat weak financial systems, corrupt government practices, and lack of access to vital services and resources. Locals use digital assets to protect their wealth, facilitate cheaper remittances, and even fight authoritarian regimes. 

A recent report from Chainalysis explores how Latin America in particular is using crypto for the various needs of its diverse populations. From Mexico to Venezuela, Latin America has seen strong grassroots adoption over the years. Indeed, Mexico is the 16th country by overall global grassroots crypto adoption in this year’s Chainalysis Global Crypto Adoption Index, while Argentina came 15th and Brazil ninth on the list.

Other developing regions, including Sub-Saharan Africa, have also seen strong adoption of cryptocurrencies, from bitcoin to stablecoins, as they grapple with soaring inflation. In short, emerging markets are a key piece of crypto’s mass adoption puzzle. Let’s dig into the use cases for digital assets by these diverse global populations.

The Latin American story

Among Latin American nations, cryptocurrencies serve a wide range of needs. Argentina, whose peso has fallen nearly 130% against the US dollar over the past year to 18 October, has seen particularly strong stablecoin adoption. Indeed, Chainalysis revealed that crypto purchases trended up as the Argentinian peso steadily lost value this year, spiking in mid-April when inflation rose above 100% for the first time in three decades.

In Mexico, meanwhile, cryptocurrency-based remittances are helping the local population make faster and cheaper payments. At an estimated $61 billion per year, Mexico is the world’s second-largest receiver of remittances, primarily from its neighbor, the US. Mexican crypto exchange Bitso reports processing some $3.3 billion in US-Mexico crypto remittances in 2022, representing 5.4% of the total market.

In contrast, Brazil, where the local currency has remained far more stable, has seen greater institutional adoption of cryptocurrency. With a population that is, on average, far better off than the rest of the region, Brazil has also seen more interest in decentralized finance (DeFi) and other innovative crypto solutions than its neighbors. 

Venezuela and the fight against inflation

And then there’s Venezuela, where the Chanalysis report highlights crypto’s use case as “a weapon against authoritarianism”. A South American nation under the authoritarian rule of Nicolás Maduro – the locals are using digital assets to help preserve their savings as the Venezuelan Bolivar plummets. Over the year to 17 October, the bolivar has lost 76% of its value against the US dollar.

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Source: Chainalysis

Yet Chainalysis’ report also reveals how cryptocurrency was used to provide direct aid to the country’s doctors and nurses that the government failed to offer. With Maduro refusing international aid, cryptocurrency remained one of the only options and eventually directly helped 65,000 doctors and nurses in the country. 

More widely, according to Chainalysis, digital assets have an important role to play in helping NGOs and democracy activists to overcome censorship and secure the funding they desperately need in hostile conditions.

Bitcoin: Africa’s digital gold?

Latin America is not the only region which has struggled with runaway inflation. In Sub-Saharan Africa, inflation has decimated many economies. Nigeria’s inflation is sitting at 26.7% in September, while Ghana is grappling with 40% inflation. 

As a result, bitcoin’s share of regional transactional volume is higher in this region than any other region globally. Stablecoins are also gaining popularity due to their lower price volatility, Chainalysis reports.

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Source: Chainalysis

It is these developing countries, rather than developed nations like the United States, that may allow bitcoin to come into its own as a safe-haven asset and truly earn its label as “digital gold”. 

However, even in these regions, investors are mindful of the volatility of the world’s largest asset. For poorer populations that require short-term access to their wealth, stablecoins may therefore present a more suitable option to protect their assets.

The verdict

These are just a few examples of the crucial role cryptocurrency plays in developing regions. 

From much-needed funding for NGOs to helping residents of embattled nations protect their wealth against inflation, digital assets have earned their place as the unsung heroes in the emerging markets story. As the developing world faces continued macroeconomic uncertainty, digital assets can support the populations of these nations and provide a safe haven from volatility, currency devaluation, and even unrest.


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