- Among the main countries receiving remittances in cryptocurrencies are Venezuela, Argentina, Brazil, El Salvador and Mexico.
- The exponential growth in the demand for remittances in crypto has awakened the tax appetite of the governments of the region that seek to keep part of the money.
In the last year, remittances in cryptocurrencies have grown exponentially up to 900% in the entire world, including several countries in the region such as Venezuela, Argentina, Brazil, El Salvador, Honduras, Costa Rica and México, according to data from the platform of exchange Coinpay.cr, cited by Forbes.
"Remittances and cryptocurrency transactions have grown between 800% and 900% in a single year," says Jorge Pasapera, founding partner of Coinpay.cr. "If you know how to have a good approach and the country promotes it in the right way, it can be widely accepted as it is easier than resorting to traditional systems," he adds. Most of the remittances to these countries come from the United States, which is home to the highest volume of immigrants on the planet. In this country, the sending of remittances to Latin America quadrupled, going from about 100 million dollars per month to $400 million between April 2020 and October 2021, according to Chainalysis estimates.
The use of cryptocurrencies is facilitating these money transfers due to the benefits it offers and cost savings in some cases. In addition, Latin America has adapted highly to cryptocurrencies due to its usability and easy access from a commercial and labor point of view.
Not surprisingly, the most recent statistics place three Latin American countries in the top ten of the economies that use cryptocurrencies the most. In the growing list of use of cryptocurrencies in LATAM, Venezuela, Argentina and Colombia appear at the top, Statista highlights.
Cryptos as an alternative for money transfers
Chainalysis studies indicate that crypto has become an alternative for money transfers from larger economies such as the US and Europe to Latin America. But they also represent a substantial saving of money by avoiding higher shipping costs in bank commissions.
So there is a double interest of people when sending and receiving remittances in cryptocurrencies instead of fiat money. The region closed 2021 with high levels of annual inflation (7.2%), while the growth of prices in Venezuela was 686%, Argentina (51%) and Colombia (5.62%).
People are trying to safeguard the value of their money by holding their savings in crypto assets. Especially stable coins like USDT, USDC, among others. Likewise, others for practical reasons use digital currencies such as Bitcoin, Ether or Ripple XRP to pay or receive their salaries.
Difficulties for the use of cryptocurrencies in remittances
However, sending cryptocurrency remittances to Latin America also has its difficulties. Therefore, it is convenient that before making operations with cryptos, senders and receivers should be well advised to avoid scams or theft.
Pasapera advises users to be careful when choosing where to buy crypto. Likewise, take into account its volatility and with whom to carry out purchase – sale operations to avoid possible scams or exchange their savings in cryptocurrencies at a lower cost.
The executive points out that some of the difficulties observed for the use of cryptocurrencies in sending remittances are their high costs and the delay in completing the transactions, sometimes.
There are people who have had to pay between 15% and 20% more than the market price, says Pasapera. Others must wait up to three days to receive the crypto and ATMs charge around 10%, he says.
On the Flipside
- Given the growth of remittances and the use of cryptocurrencies, Latin American governments are taking accounts and seeking to cash in crypto transactions to increase their income.
- The Venezuelan government has just approved the Law on Large Financial Transactions (it actually covers small ones as well) carried out in foreign currency or crypto. The tax to be collected will range between 2% and 20%, depending on the transaction.
Why You Should Care
- Venezuela receives between $3 billion and $4 billion annually in remittances, which represent around 5% of the country’s GDP.
- Due to the growing use of cryptocurrencies and the increase in crypto capital flows, digital assets will become a permanent source of income for Latin American governments.
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