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Bitcoin | © Antana/Flickr
Bitcoin | © Antana/Flickr
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Why Cryptocurrency is Taking off in South America

Picture of Harry Stewart
Updated: 24 December 2017
Unless you’ve been living under a rock, you’ve probably heard of cryptocurrencies like Bitcoin, decentralized digital money whose unprecedented growth has sent the financial world into a tizzy. Yet, remarkably, cryptocurrencies have very little practical use, causing some economists to speculate the investment bubble is primed to burst. But that’s not the case in South America, where a number of regional factors have seen Bitcoin become a viable transactional currency for the masses.

Famous for its peaks and troughs, Bitcoin has seen savvy investors enjoy truly astronomical returns or, more recently, some heartbreaking losses. Nevertheless, a relatively reliable international banking system coupled with Bitcoin’s excessive transaction fees has meant few people in the developed world actually use the currency outside of investment.

In South America, however, Bitcoin and other cryptocurrencies are now in the domain of everyday users as well.

One reason is a lack of access to the traditional banking system. A 2014 study by the World Bank found as few as 49% of Latin American adults had a bank account, largely due to the complex bureaucratic process and costs involved. But what the majority do have is access to a smartphone or computer meaning it’s easier for them to manage certain financial transactions through Bitcoin than a bank.

Furthermore, substantially fewer Latin American adults have a credit card so everyday payments are typically made with cash. To an extent, cryptocurrencies are filling the gap by acting as a secure online alternative for both small and large transactions. Conversely, credit cards are already well established in more developed countries which explains why high-fee cryptocurrencies have failed to take off as transactional currencies in the Western world.

Entel Tower, Santiago, Chile