Latin America is the region that the drop in remittances worldwide has been least affected. Interest in cryptocurrencies in the region has grown as a result of the need to send remittances.
In recent years, sending remittances to low-income countries has gained greater prominence in several economies around the world. Although Bitcoin has been off the radar, it has contributed to this situation.
According to statistics from the World Bank (WB), remittances recorded an all-time high in 2018, with flows of USD 529,000 million. However, the agency expects a decline of around 14% to occur between 2020 and 2021, compared to 2019.
Estimates suggest that there will be a drop in remittances to USD 508,000 million in 2020 and another to USD 470,000 million in 2021. The effects of the COVID-19 pandemic have generated little economic growth and low levels of employment in the countries that receive migrants. This is a factor that has contributed to this decline.
In this context, Latin America is the region that the drop in remittances globally has least affected. The agency estimates a drop in the flow of remittances to Latin America by 0.2% in 2020 — with transfers of up to USD 96,000 million — and by 8% in 2021.
Despite the drop that occurred between April and May, there was an increase in the remittances that some countries received between June and September.
The countries that experienced growth in remittances include Colombia, El Salvador, and the Dominican Republic, according to the WB report. Meanwhile, Mexico also had a rise, maintaining leadership in the region as the main recipient of remittances.
This data only takes into account the transfers that users make with fiat money through traditional platforms. Although there are no statistics, the situation is different when taking into account the use of Bitcoin and other cryptocurrencies among the international migrant population.
This bullish trend leads to greater adoption of cryptocurrencies in the region, within the framework of the interest in digital payments and less use of cash.
Non-profit organization Inter-American Dialogue published a study earlier this year. The text states that digital remittances (or online digital payment transactions) have represented at the least 20% of the remittances market share since 2019.
Cryptocurrency Remittances Boom in Latin America
Within the trend towards greater use of digital remittances is precisely where Bitcoin fits.
According to the Chainalysis “2020 Geography of Cryptocurrency Report”, the need to send remittances is one of the factors driving the interest from Latin Americans in cryptocurrencies. In addition to this are the obstacles to accessing the traditional banking system and the inflation that affects several countries.
The analysts consider that the issue of remittances is key in Latin America since they represent 1.7% of the region’s total GDP. By relating this fact to blockchain transactions, the firm notes that there is a concordance.
“90% of the cryptocurrencies that arrive in Latin America come from outside the region.” The flow of remittances moves mainly from the United States.
There is also concordance in the use of cryptocurrencies, beyond the speculative investment common in other regions. Chainalysis says that “these problems drive companies, not just people, to conduct transactions with cryptocurrencies.”
By Alexander Salazar
