WASHINGTON, CMC -A new study has found that the cryptoasset ecosystem in Latin America and the Caribbean has grown substantially, with the number of firms more than doubling since 2016.
The landmark study by the Inter-American Development Bank (IDB) and the Cambridge Centre for Alternative Finance (CCAF) at the University of Cambridge Judge Business School showed that over 170 crypto asset firms were serving the region in 2022, of which almost 100 were headquartered or incorporated in Latin America and the Caribbean.
The IDB and CCAF surveyed 52 private firms and regulators and interviewed several crypto players for the report “Cryptoasset Ecosystem in Latin America and the Caribbean.”
The study broadly defined crypto assets as digital tokens, such as security tokens, stablecoins, utility tokens, and cryptocurrencies that use distributed ledger technology or similar technology systems to electronically store or transfer the digital representation of value or rights.
It said making cross-border remittances and payments are among the most critical use cases for crypto assets in Latin America and the Caribbean today.
According to the study, the cryptoasset industry increased between 2020 and the first half of 2022. A median cryptoasset company doubled its users in 2020, with a median growth rate close to 50 percent in 2021 and the first half of 2022.
It said users’ engagement with company services has also grown, as the share of active and identity-verified users has gradually increased over the past years.
The study also surveyed 31 public institutions in mid-2022 to learn how regulators perceive the industry and what regulatory measures are being taken. Most regulators believe cryptoassets are helpful, especially in creating a more inclusive financial services landscape. Only seven percent of public sector survey respondents deemed cryptoassets useless, and almost 80 percent stated that cryptoassets offer new functions complementary to traditional financial solutions.
Both cryptoasset companies and financial regulators believe cooperation between industry and the public sector is necessary to shape the region’s safe and innovative cryptoasset ecosystem.
Both sides stressed the need for more transparent regulatory frameworks to allow the industry to develop. Despite the perceived willingness to cooperate, most public sector survey respondents said their current level of collaboration with private companies could be higher.
“The cryptoasset industry, which encompasses more than the trading and speculation of cryptoassets, has the potential to be a game-changer for financial inclusion in Latin America and the Caribbean.
“By providing new opportunities for payments infrastructure, cross-border payments, digital identity, and other services, cryptoassets could help to bring financial services to those who are currently underserved,” said Anderson Caputo, Chief of the IDB’s Connectivity, Markets and Finance Division.
“To realize this potential, the public and private sectors must collaborate. First, they should engage in dialogue to better understand the risks and opportunities of crypto assets. Second, they should work together to develop public policy for the industry to grow while protecting users, investors, and the financial system as a whole,” he said.
Executive Director and Co-founder of CCAF, Bryan Zhang, said the rapid pace of change in the cryptoasset ecosystem has increased the urgency for greater understanding and cooperation among public and private stakeholders to ensure that the industry’s development is sustainable, consumer protection is robust, and policymaking is evidence-based.
“We hope this study’s findings will provide insights into the development of the cryptoasset ecosystem in Latin America and the Caribbean and inform evidence-based decision-making and regulation,” Zhang added.
Cryptoasset companies are gradually evolving into increasingly full-service financial technology (fintech) providers, serving as a one-stop shop for investors, consumers, and businesses. According to the study, the most common services these firms offer are buying and selling cryptoassets, receiving, sending, and storing cryptoassets, cryptoasset-related education, and consulting.