Difficulty access to banking services leads to an increase in the popularity of cryptocurrencies
A significant part of cryptocurrency transfers are commercial
Russia has fenced off from any cryptocurrency transactions as money
International consortium of news organizations developing transparency standards.
A weak national currency in addition to an overly regulated banking sector leads to a rapid rise in the popularity of cryptocurrencies
Analysts at blockchain-focused company Chainalysis concluded that difficult access to banking services and the need for remittances are key factors for the transition to cryptocurrencies.
Due to the volatile economic environment, many Latin American businesses prefer cryptocurrencies to their local currency for commercial transactions, according to a report titled “How Latin America Mitigates Economic Instability with Cryptocurrency”.
According to World Bank statistics, remittances account for 1.7% of total GDP in Latin America, and only the Middle East, North Africa and sub-Saharan Africa have a large share of GDP made up of remittances from abroad..
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On-chain data is also consistent with this: 90% of the cryptocurrency received by Latin America comes from outside the region..
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Speaking to Chainalysis, Patricia Risso, Head of Regulatory Risk at Mexican crypto exchange Bitso, confirmed that cryptocurrency transactions from the US to Mexico are common..
“We estimate that Mexico received about 11% of retail payments in the region, behind only Brazil and Venezuela,” she said..
Made in China
Besides the United States, East Asia is also an important partner for Latin America..
Luis Pomata, co-founder of Paraguayan crypto exchange Cripex, confirms that many Brazilian companies buy goods from China using bitcoin.
“Banks in Paraguay are concerned about money laundering and are picky about who they will serve, so the process of applying for banking services is long and complicated,” said Pomata..
An equally important factor in the popularity of cryptocurrencies is the difficult access to banking services..
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The head of operations at the SatoshiTango crypto exchange, Sebastian Villanueva, said that many in Latin America have uneven income.
“Working at Uber or similar [non-permanent] jobs makes it difficult to open a bank account,” added Villanueva..
However, Latin America also recorded a high level of criminal activity with cryptocurrencies, which is 2.4% of the total volume in the region..
Nevertheless, according to Chainalysis, the volume of illegal cryptocurrency transactions in the region has already begun to decline..
Against digital innovation
In Russia, according to the law “On digital financial assets”, cryptocurrencies are not legal tender.
The course towards total control of economic activity was taken back in early August, when amendments to the law “On the National Payment System” came into force in Russia..
According to the amendments, in Russia it is now impossible to replenish electronic wallets in cash anonymously through terminals.
And if the restrictions on anonymous replenishment were explained by the fight against the financing of terrorism, then the recent proposal of the Ministry of Finance of the Russian Federation to prohibit miners from receiving cryptocurrency raised much more questions..
Mikhail Uspensky, Deputy Chairman of the Commission on Legal Support of the Digital Economy of the Moscow Branch of the Russian Bar Association, considers the amendments of the RF Ministry of Finance to be at least illogical:
“It turns out that for the legal transfer of bitcoin within a family, a person will only have to commit suicide.”.
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