Stablecoins Gain Traction as Inflationary Shield in Latin America With Growth in Europe

Stablecoin adoption worldwide continues apace despite the bear market and the banking crisis, when some projects (notably the USDC stablecoin) lost their dollar peg, Latin American and European crypto specialists said during a recent Spanish-language CoinDesk Twitter Spaces event.

“We see that stablecoin adoption continues to rise nonstop since 2019. In fact, stablecoins today represent more than 50% of Belo’s trading volume,” said Manuel Beaudroit, CEO and co-founder of Belo, an Argentina-based crypto exchange that operates in 136 countries.

Read this article in Spanish.

“Our second-biggest market is El Salvador, where bitcoin is a legal tender, and many users use our platform to deposit bitcoin in exchange for USDT,” he added. (USDT is the symbol for tether, the biggest stablecoin by volume.)

Stablecoin market share kept growing during the bear market, even with the fall in price of bitcoin, ether and other alternative coins, said Agustín Liserra, CEO and co-founder of Num Finance, an Argentina-based company that issues stablecoins pegged to developing countries currencies.

“Although it is true that crypto activity has decreased since the bear market, the participation and capitalization of the stablecoin market has grown a lot,” Liserra said.

Adoption varies by region. In more developed economies the growth was driven mainly by seasoned traders and investors while in Latin America it came more from everyday citizens trying to protect their money from inflation.

In Europe, stablecoin adoption has been increasing since the crypto winter of 2017, when most investors and traders wanted to protect themselves from volatility within the crypto system, says Cristina Carrascosa, CEO and co-founder of ATH21, a Spain-based legal firm specializing in crypto and blockchain companies.

“The adoption in Europe didn’t come from fear or from wanting to protect savings, but more from speculation and using [decentralized finance] protocols to seize the benefit of the returns,” Carrascosa said.

A Latin American way

Latin America has some of the world’s highest inflation rates, with up to 50% of its workforce working in informal conditions and therefore operating outside the banking system.

In Argentina, the central bank imposed severe restrictions on citizens from buying U.S. dollars, hoping to maintain its own federal reserves. That increases the attraction of buying a dollar-denominated stablecoin via the internet. “With a stablecoin, you can access a dollar account without having a dollar account,” Beaudroit said.

“Many people wanted to find a way to ‘dollarize’ their savings and found in DAI, USDC and USDT a very friendly way to do it,” Liserra said, referring to the stablecoins.

According to Chainalysis' 2022 "Geography of Currency" report, Latin America’s key crypto adoption drivers are storing value and sending remittances, for which stablecoins are widely used.

Meanwhile, central, northern and western Europe are the largest crypto economies worldwide thanks to DeFi, non-fungible tokens and increasing regulatory clarity, with a lower daily usage for stablecoins. “The new regulation affects all players such as service providers, token and stablecoin issuers who need to apply for licenses to operate and a published white paper,” Carrascosa said about the EU's recently approved MiCA regulation. “Regulatory demands increase for stablecoin issuers that become ‘relevant’ to supervisors,” she added.

“[European] users are beginning to forget about fiat currency as their business flow is earned and spent directly in stablecoins,” Carrascosa said.

This is also a trend in Latin America, where more people now earn their salary directly in “crypto dollars” or stablecoins, depositing them in wallets and using them to live every day, according to Beaudroit.