Original title: BLOCKCHAIN LATAM REPORT 2024
Author: Sherlock Communications
Compiled by: ChainCatcher
Table of contents
1. Introduction
2. Analysis of some countries/regions (ecosystem, regulation, key players)
- Brazil
- Argentina
- Mexico
- Colombia
- Peru
- Venezuela
- Chile
- Ecuador
- Dominican Republic
- El Salvador
- costa rica
- Panama
3. The Current State of Cryptocurrency and Blockchain in Latin America
Preface
We will officially welcome institutional investors to the crypto community in 2024. The past two years of hard work, especially on the regulatory side, have been a lot of testing, experimentation, and establishing a regulatory path for cryptocurrencies in Latin America and around the world.
In the coming bull run, we will see Bitcoin frequently in the news, new all-time highs, celebrities advertising cryptocurrencies, new MeMe coins appearing, making crypto enthusiasts rich. There will be a ton of crypto projects, and probably 90% will fail. I recommend reading Travis Kling’s paper on financial nihilism to understand the macro principles we are facing as we enter this bull run.
The last crypto winter was not easy. The crypto community suffered significant losses, but we managed to hold some of those responsible accountable for their actions. In the wake of the FTX and Luna frauds, we saw a lot of regulatory progress and prison sentences around the world. FTX founder SBF was convicted and is serving time in prison. Terraform Labs (Luna) from Montenegro and the United States and South Korea have both requested his extradition for his role in the terrorist bombings. Binance founder and CEO CZ, known as CZ, was found guilty of money laundering and agreed to resign from the world's largest cryptocurrency exchange as part of a settlement with U.S. law enforcement and financial regulators.
Holding people of influence and power accountable for their actions is a good thing for the industry. Governments have learned from these cases and accelerated plans to establish regulatory frameworks. Thus, paving the way for the approval of a Bitcoin spot ETF in the United States and an Ethereum ETF in 2024. Countries around the world are approving crypto-friendly regulations, and the macroeconomic environment is also more favorable for cryptocurrencies.
After two years of rapid rate hikes, the Fed is expected to maintain or lower interest rates in 2024. Other central banks that are controlling inflation should follow this trend. Brazil has already started. This is very positive for cryptocurrency investments because investors are willing to put more money into higher-risk investments.
All of this comes at a good time for the upcoming Bitcoin halving, which will see miner rewards drop from 6.25 BTC per block to 3.125 BTC and Bitcoin’s daily supply fall from 900 BTC per day to 450 BTC per day.
One conclusion from our research is that Latin America is poised to ride the cryptocurrency wave.
Latin American countries like Brazil and El Salvador are leading the way in terms of regulatory frameworks for cryptocurrencies. Brazil has established friendly regulations, has great potential to develop RWAs (real world assets), a diverse and vibrant community, and has a CBDC in the pilot phase (called DREX). In El Salvador, Bitcoin is legal tender, the government encourages adoption, and incentivizes crypto tourism, but I think we should keep a close eye on Bitcoin Bonds. This project has the potential to disrupt the bond market and become a use case for other countries.
In terms of the ecosystem, Argentina recently elected a crypto-friendly president and has seen strong grassroots adoption due to currency devaluation. Mexico is seeing growth in cryptocurrency adoption, helped by remittances with low fees and fast transactions. Meanwhile, Ecuador and Guatemala are using blockchain technology to provide transparency and credibility to their national elections.
Multiple grassroots projects inspired by Bitcoin Beach in El Salvador have sprung up across the continent: Bitcoin Jungle in Costa Rica, Bitcoin Lake in Guatemala, Bitcoin Beach in Brazil, and more.
In a bull market, we will see institutional money nurturing the grassroots crypto ecosystem for the first time. All the capital inflows from institutional investor demand and potential gains in BTC prices will also benefit small crypto holders around the world, especially in Latin America, where grassroots adoption is significantly higher, with “adoption out of necessity” scenarios to protect assets from inflation or reduce remittance fees.
It will be very interesting to watch the Latin American ecosystem develop and mature in this new context. There is still a long way to go and many challenges lie ahead - the biggest challenge remains education to increase user adoption. I hope we can pool our resources and increase adoption across the continent. I hope cryptocurrency brings hope to many Latin Americans and people around the world. I hope it brings decentralized prosperity and abundance.
This report highlights key aspects of the blockchain ecosystem in 21 Latin American countries, focusing on their cryptocurrency ecosystems, regulations, and key players. Our goal is to provide valuable insights for organizations aiming to enter the region. ( *To ensure the reading experience, ChainCatcher deleted some content from less influential countries and regions during the compilation process. Interested readers can check the original link to read the full content )
Brazil
Ecosystem:
Brazil is the largest cryptocurrency market in Latin America, ranking 9th in the world according to the 2023 Global Cryptocurrency Adoption Index, down from 7th in 2022.
Even during the bear market of 2022-2023, cryptocurrency adoption in Brazil continued to grow. By 2023, the number of registered investors exceeded 4.1 million people and 92,000 companies. These numbers continue to increase as ETFs facilitate the flow of funds from ordinary investors into the cryptocurrency market and major global exchanges like Binance, Coinbase, and Crypto.com make the Brazilian market a focus.
Cryptocurrency-related ETFs debuted in Brazil in 2021, initially linked to Bitcoin and Ethereum. They have been a huge success, allowing investors to enter the cryptocurrency market in a simple, secure and regulated way.
The first crypto ETF - HASH 11, launched by Hashdex, has become the second most traded futures on the Brazilian Stock Exchange just 9 months after its launch and currently has more than 150,000 investors.
Other ETFs have also been listed on the Brazilian Stock Exchange, with investment options ranging from carbon-neutral Bitcoin to DeFi, the Metaverse, and Web3.
Traditional financial (TradFi) players have entered the market now that Brazil has established clear regulations, especially with the upcoming launch of the digital transformation of the Brazilian financial services sector. If the Brazilian economy could be tokenized, how big is the opportunity? Major players are already experimenting, with promising initial results.
Brazilian bank Itaú Unibanco has introduced cryptocurrency trading services to its clients as part of its investment platform. Itaú, Brazil’s largest bank by assets under management and one of Latin America’s leading lenders, has launched cryptocurrency trading for the first time for Bitcoin and Ethereum, with plans to add other cryptocurrencies soon.
Itaú participated in the Brazilian Central Bank Lift Challenge, working with R3 Corda and B3, to use a PvP (payment-to-payment) method for international payments in an application in Colombia. This is an effort to improve cross-border payments, and the Latin American market is large, especially when it comes to international trade.
Santander plans to launch cryptocurrency trading capabilities in Brazil and has participated in the Brazilian Central Bank Lift Challenge to launch a DvP (delivery versus payment) project, in which used car and real estate titles will be tokenized and delivered upon payment.
Bradesco, the third largest bank in Latin America, has entered the world of cryptocurrencies through its first tokenized credit note issued in 2023. The pilot operation, conducted in partnership with Bolsa OTC, tokenized nearly $2 million in bank credit notes, also distributed by the bank.
Visa and Microsoft have created a project on the Lift Challenge to use blockchain to provide financing to Brazilian small and medium-sized enterprises (SMEs). Through programmable money enabled by smart contracts, these businesses can be more easily accepted by global investors and capital than is currently the case.
Mercado Livre, one of the largest online marketplaces in Brazil, has invested in 2TM, the holding company of Mercado Bitcoin, and has enabled Brazilian residents to buy, sell and hold major cryptocurrencies like BTC and ETH through its subsidiary Mercado Pago, a major payments company in Brazil with more than 20 million active users and 1 million crypto customers.
Nubank, Brazil’s largest digital bank , will offer Bitcoin and Ethereum to its customers starting in 2022, expanding to 10 other tokens and beginning to accept the USDC stablecoin. The bank announced a partnership with Polygon to create Nucoin, their own crypto asset, as a loyalty rewards program.
BTG Pactual, one of Brazil's leading investment banks, already offers several crypto ETFs to its user base. The bank created its own cryptocurrency exchange, Mynt, to offer cryptocurrencies to its clients and launched BTG Dol, the first stablecoin backed by a traditional bank. BTG announced a strategic partnership with Crypto.com and an investment in blockchain development company Lumx.
Meanwhile, XP Investimentos and Picpay left the cryptocurrency market, citing regulatory uncertainty.
On the development side, Cryptum is enabling Web2 businesses to enter the Web3 universe through a blockchain-as-a-service solution, making the transition to Web3 smoother and more accessible in the short term.
Brazil’s cryptocurrency community is fostering a fertile regenerative finance (ReFi) ecosystem. Social currencies like Muda Outras Economias, as well as projects like Ambify, Ekonavi, Agroforest DAO, Surfguru DAO, and One.percent are growing organically and gaining momentum in the community.
Builders are using Web3 to make a positive impact, including carbon credit platforms like Moss, Ribon DAO, which incentivizes donations, and Play4Change, a DAO that promotes education, financial inclusion, and social change, with thousands of Brazilians using Web3 tools.
Brazil hosted several cryptocurrency events in 2023: highlights included Ethereum Rio 2023, Eth Samba 2023, NFT Brasil 2023, and Blockchain Rio Festival. A grassroots Rio Crypto Hub community hosted monthly events that brought together the city’s Web3 community.
Meanwhile, Rio Onchain Week, Eth Samba, and Blockchain Festival are Web3 events confirmed to be held in Brazil in 2024.
Even during the bear market of 2023, the Brazilian NFT community continued to grow. Cryptorastas, a Brazilian project supporting reggaeton culture, has been adopted globally and has become a “Made in Brazil” success story. Nouns, one of the most well-known NFT projects, has a Nouns Brasil community, and its child DAO Gnars, which supports extreme athletes, has a 20% share of Brazilian Discord members.
Surfjunkies, a welfare club that uses NFTs as membership cards, was launched in 2023 and successfully mixed surfing and NFTs. These projects were born in the crypto bear market and are expected to reach a higher level in the bull market.
Nouns hosted several community events in Rio de Janeiro and even had a live prop-making event — recycled plastic sunglasses made by Precious Noggles, a collaboration between Nouns and Precious Plastic, made by Brazilian designer Mariana Salles and funded by the Nouns DAO.
Action sports athletes like Bob Bergquist (skateboarding), Carlos Bull, and Bruno Santos (surfing) are participating in NFT projects and leveraging their audiences to engage communities like Gnars DAO and Surf junkieclub. Gnars is promoting meetups and renovating skate parks and beach park entrances, while Surf Junkie is promoting experiences like VIP passes to music festivals.
Football NFTs have lost their appeal in the 2021-2023 crypto bear market. But promising use cases continue. Coritiba shared the $100,000 sale of football player Domilson Cordeiro dos Santos, aka Dodô, one of the first use cases for the tokenization of real-world assets (RWAs) promoted by Brazilian startup Liqi.
Regulation:
Brazil approved a bill in 2023 that establishes rules for everyday cryptocurrency use while creating a regulatory framework for "virtual assets" and their service providers. It also considers digital assets as securities and defines crimes and fines related to the use of digital assets for fraud, with the overall goal of increasing investor protection. Currently, the issue of Bitcoin as legal tender is not on the agenda of Congress.
The executive branch issued a decree stipulating that cryptocurrencies will be regulated by the Brazilian Securities and Exchange Commission (CVM) and the Central Bank of Brazil (BCB). The main focus in 2024 will be the finalization of the regulatory framework for cryptocurrencies, which still needs further development.
Another important step is the testing and launch of the Brazilian Central Bank Digital Currency (CBDC), the Digital Real (DREX). It has been pilot tested in the LIFT Challenge since March 2023. The official DREX website states that there is no estimated launch date yet.
The CVM issued Circular Letter CVM/SSE 04/2023 for 2023, providing guidance on accounts receivable tokens or fixed return tokens (TR) and characterizing them as securities, intended for exchanges and virtual asset service providers. These tokens are subject to securities laws and must comply with this regulatory framework. It is not clear whether the CVM has banned staking tokens, but at the time of writing, most exchanges are offering staking services to users.
In a unanimous vote of service providers on the CVM consultation, support was expressed for allowing and regulating staking services in Brazil.
Regarding taxes, a recent update is the imposition of a new 15% income tax on cryptocurrencies held on foreign exchanges. This regulation will take effect from 2024.
Holders of cryptocurrencies on Brazilian exchanges are subject to the same rules: if the value exceeds R$5,000, they must declare it on income tax. Any sale of cryptocurrencies is subject to capital gains tax. In May 2022, the Brazilian Tax Agency (RFB) clarified the requirements for investors to pay capital gains tax when converting one cryptocurrency to another. Trading cryptocurrency pairs incurs tax liability regardless of whether there is an intermediate conversion to Brazilian real.
Key Players:
Central Bank of Brazil, Mercado Bitcoin, Nubank, Mercado Pago, Foxbit, BTG Pactual, Santander, Bradesco Bank, Lumx, Hashdex, BLP Crypto, Stratum Blockchain, MOSS, OnePercent, QR Capital, Play4 Change, Muda Outras Economias, Binance, Crypto rastas, NounsBR, Pods Finance, RibonDAO, Surf Junkies, CELO, Mynt, Cryptum
Argentina
Ecosystem:
It is estimated that there are about 5 million Argentines who hold cryptocurrencies, but one thing is certain: cryptocurrency adoption is growing in this country, which is the second-largest cryptocurrency market in Latin America and ranks 15th in Chainalysis’ 2023 Global Cryptocurrency Adoption Index, down from 13th in the world in 2022.
Despite the bear market, Argentina’s growth has been linked to inflation . Annual inflation reached 211% in 2023, the highest since the early 1990s. This, along with the government’s strict capital controls and other factors, explains why Argentines have turned to cryptocurrencies — and especially stablecoins — to protect their savings.
Each Argentine citizen has a personal limit of $200 per month and can buy dollars at the official exchange rate, although demand is higher due to the peso’s depreciation. That’s where informal dollar markets like Dollar Blue and stablecoins known as cryptodolares come in.
The election of President Javier Milei is changing that. Milei, who is dominated by liberal ideas, is leading crypto-friendly economic reforms, such as integrating Bitcoin and other cryptocurrencies into the economic framework and legally accepting it as a means of payment in contracts. Milei has also proposed a bill to regulate undeclared crypto assets and potentially dollarize the Argentine economy.
Free access to dollars may slow stablecoin adoption, but the 2024 bull run will bring many different listing tools, and Argentina’s vibrant and creative cryptocurrency ecosystem will have more freedom to build, adopt, and create blockchain-based applications.
The cryptocurrency community in Argentina is expected to continue to grow.
Here are some interesting examples of what is happening in the country’s ecosystem:
- Ripio, an Argentinian exchange with over 8 million users and over $200 million in trading volume, helped launch Layer 1 blockchain LaChain and launched UXD, a new USD-pegged stablecoin for LaChain users in Argentina and Brazil.
- Founded in 2019, Lemon Cash is a cryptocurrency wallet with 1.8 million users. In 2021, they began offering the Lemon Card, which allows users to pay in Argentine pesos using their crypto assets and receive up to 2% cashback in BTC. In 2023, Lemon Cash launched the first nationwide peer-to-peer (P2P) cryptocurrency trading marketplace.
- Blockchain infrastructure company SenseiNode has raised $3.6 million in a seed round and will use the resources to expand its node operations in Latin America, where less than 1% of nodes are deployed. The company recently announced a milestone of $1 billion in assets under management.
- Open Vino is an open source initiative that aims to bring more transparency and ethical business practices to the wine industry, using blockchain technology and new models of ownership and value assessment. The proof of concept is being developed at Costaflores boutique winery in Mendoza.
- There are about half a million freelancers in Argentina who need to receive money from abroad. They have several ways to do this, one of which is the Bitwage platform, which has seen a sharp rise in demand in 2023: the number of Argentines using the platform to work and receive wages in cryptocurrency has grown by 300%.
- Binance’s sponsorship of the Argentine Football Association (AFA) was canceled due to contract breach, citing lack of compliance.
- Low energy prices and a cool climate are incentivizing mining operations in the country - Canadian company Bitfarms began their Bitcoin mega-farm operations in 2022 and expanded production in 2023, having secured a prepaid contract at $21 per MWh, increasing the cost efficiency of their mining operations in Argentina.
Regulation:
Following the election of Javier Milley, the government’s regulatory stance towards cryptocurrencies appears to be more friendly.
Mile's first step is to propose an asset regularization initiative that would allow Argentine taxpayers to legalize their crypto assets without additional documentation about their origin. Regularization involves a flat tax rate on declared assets: 5% in March 2024, 10% from April to June, and 15% from July to September.
An executive order is expected to be issued in early March to regulate cryptocurrency exchanges to comply with KYC and AML rules. Mile’s regulatory efforts are aimed at preventing Argentina from being put on the Financial Action Task Force’s (FATF) grey list again.
The Central Bank of Argentina (BCRA) has pushed for several anti-cryptocurrency rules, which the FinTech Association claims should be reviewed.
There are currently three cryptocurrency taxes in Argentina, two of which were created in 2021:
- Income tax: Cryptocurrencies are taxed like any other intangible asset. Income from the sale of digital currencies is taxed at 15%. This is the only cryptocurrency tax until 2021.
- Provincial taxes: In 2021, the province of Córdoba will impose a 4 to 6.5% tax on gross income, as per the legislation adopted. Individuals and businesses that exchange cryptocurrencies “for goods or services” will be taxed at a rate of 0.25%.
- Other provinces, such as Tucumán, Entre Ríos and Catamarca, have begun to impose additional taxes on gross income generated from trading cryptocurrencies.
- Check tax: In November 2021, the Argentine government updated its "check tax" rules to include cryptocurrency exchanges. This means that the purchase and sale of cryptocurrencies will be subject to a bank debit and credit tax of up to 0.6%.
Key Players:
Mercado Libre , Bitfarms , Moneda Par , Lemon Cash , RSK , Ripio , Sensei Node , Attic Lab , Bitwage , Binance , EOS Argentina
Mexico
Ecosystem:
Mexico has a growing cryptocurrency industry that includes more than 3.1 million cryptocurrency owners, or 2.5% of the total population. Mexico ranks 16th in the 2023 Global Cryptocurrency Adoption Index and 3rd in Latin America, up from 28th in 2022.
Remittances are a major driver of adoption in the country. Mexico is the second-largest recipient of remittances in the world, with total amounts reaching a record high of $63 billion in 2023. These figures represent a huge opportunity for the crypto ecosystem, and many players are trying to enter this market.
In 2023, Bitso processed $4.3 billion in the U.S.-Mexico corridor, up from $3.3 billion in 2022. The Mexican exchange grew 60% in its Bitso Business division, reaching annualized global volumes of $8 billion.
Another major player entering the Mexican market is Coinbase. The US-based exchange provider recently launched a remittance pilot in Mexico, which aims to facilitate cryptocurrency cash withdrawals and provide services that are up to 50% cheaper than traditional cross-border payment methods. Recently, they launched the Coinbase Wallet, which allows users to send remittances with zero fees.
Ripple is also eyeing the Mexican market as the Central Bank of Mexico is analyzing whether to use xRapid as a bridge mechanism between the U.S. dollar and the Mexican peso.
The Mexican government plans to launch its own central bank digital currency (CBDC) by the end of 2024, following in the footsteps of Brazil and Peru.
Predictions for the Mexican crypto ecosystem have been ongoing since 2020. A study by the Ponemon Institute showed that approximately 40% of Mexican companies are eager to implement blockchain technology in some form, with 71% of them focusing on the use of cryptocurrencies.
Grupo Salinas announced that it will accept Bitcoin payments via the Lightning Network in 2023. The announcement comes from the country’s third-largest conglomerate, whose businesses range from banks to retail stores, from football clubs to TV channels — all of which are owned by Bitcoin enthusiast and billionaire Ricardo Salinas.
Communications companies are also adopting cryptocurrencies: Telefónica (Movistar) and Nova Labs will launch blockchain-based mobile infrastructure in Mexico, and Telefónica will also use Helium mobile hotspots to expand its existing coverage in Mexico City and Oaxaca.
In October 2023, Etherfuse, a platform designed to improve decentralized blockchain infrastructure, announced “Stablebond,” a tokenized bond product for retail investors in Mexico.
Regulation:
The main regulation currently in force is the Fintech Law, which aims to provide guidelines for electronic payments, crowdfunding, and digital assets in the country. Cryptocurrencies are recognized as digital assets and are therefore legal means of payment and exchange. A regulatory sandbox has been established for innovative projects.
The Central Bank of Mexico (Banxico) is the central authority that oversees cryptocurrencies. The agency is currently analyzing the regulation of cryptocurrencies to protect digital asset users. Banxico President Victoria Rodriguez Ceja said that the “use of cryptocurrencies” is “not supported by the Bank of Mexico,” but acknowledged that citizens have “freedom to conduct digital asset operations” and that companies in the industry must comply with “certain obligations to prevent money laundering.”
Among those in Mexico’s Congress who have shown an interest in cryptocurrencies is Senator Kempis Martinez, who said after a visit to El Salvador that “the adoption of Bitcoin as legal tender is an opportunity for national growth.”
Key Players:
Bitso, Volabit, Coinbase, Ripple, Banco Azteca, Banxico, Telefonica, Helium, Etherfuse, investment companies Exponent Capital, Lvna Capital and GBM, ConsenSys Academy and BIVA.
Colombia
Ecosystem:
Colombia ranks 32nd in the Chainalysis 2023 Global Cryptocurrency Adoption Index, down from 15th in 2022 and 11th in 2021. It currently ranks 4th in Latin America, behind Brazil (9th globally), Argentina (15th), and Mexico (16th).
Colombia has the fastest grassroots adoption growth of any country in Latin America. The drop in the Crypto Adoption Index ranking can be attributed to a decline in decentralized finance (DeFi) activity, with Colombia ranking 46th in this regard.
More than 5.6 million Colombians are actively involved in cryptocurrencies, and between 2022 and 2023, the country added 5 new Bitcoin ATMs, with a total of 45 Bitcoin ATMs currently in operation.
As is typical in Latin America, the main drivers of adoption are high inflation rates and cross-border payments. Colombia’s inflation rate reached 13.12% in 2022 and 9.28% in 2023 – a total inflation rate of 22.4% over two years, which has incentivized the adoption of cryptocurrencies to prevent currency depreciation.
Remittances also play an important role in Colombia's economy, with $9.4 billion received in 2022, mostly from the United States. A 2022 World Bank report stated that the average cost of sending $200 to Latin American countries is 5.8%. Using cryptocurrencies is faster and cheaper to transfer money from overseas. After a successful pilot in Mexico, Bitso has also launched its remittance service in Colombia.
Education and events play a major role in growing the crypto community. Crypto Latin Fest was held in 2023, and two major Ethereum ecosystem events, VI Devcon and Eth Medellin, were held in 2022.
The Colombian government has become increasingly friendly to blockchain technology, issuing a guide in 2022 for implementing blockchain in public projects; partnering with Ripple Labs as part of an effort to correct land distribution; and considering introducing a central bank digital currency (CBDC) to facilitate transactions and reduce tax evasion.
The Central Bank of Colombia has partnered with Ripple (XRP) to explore blockchain use cases, such as Ripple’s CBDC platform, to improve its high-value payment systems. The initiative, which is being conducted by the Colombian Ministry of Information and Communications Technologies (MinTIC), is still in the pilot phase.
Under the country’s regulatory sandbox, banks are working with cryptocurrency exchange firms to conduct cryptocurrency activities. Buda.com is working with Banco de Bogotá, Binance is working with Davivienda, and Gemini is working with Banco Lombia.
Notable Colombian-based initiatives include: Tropykus, a decentralized finance platform based on Bitcoin and built with RSK, focused on the Latin American market, Populart, an NFT project highlighting Spanish-speaking talent, and Hash House, a Web3 hub in Medellín.
Regulation:
The Colombian government has taken a friendly regulatory approach to cryptocurrencies, launching a regulatory sandbox in 2021. The government has also issued cryptocurrency taxation guidelines and anti-money laundering (AML) regulations.
A bill aimed at regulating crypto assets was submitted to Congress by the end of 2023. It seeks to establish a regulatory framework to define operations carried out on digital platforms in Colombia, following similar legislation recently passed in Brazil.
Key Players:
Buda.com Colombia, Panda Exchange, RSK, ViveLab Bogotá, Cajero.co, Inti Colombia, Paxful, Binance, Bitso, Gemini, Obsidiam.com, Banexcoin, Tropykus, Ripple, LACChain, Populart, Hash House
Peru
Ecosystem:
Peru ranks 49th in the global 2023 Cryptocurrency Adoption Index and 6th in Latin America, down from 35th in the world in 2022.
The country has more than $20 billion in total cryptocurrency value, of which about 30% comes from P2P transactions, as well as 51 crypto-friendly businesses registered on Coin Map (down from 91 in 2022) and 5 crypto ATMs (down from 7 in 2022), according to data from Coin ATM Radar.
As in many other Latin American countries, inflation and currency instability have led to the growth of blockchain initiatives and cryptocurrency adoption. With annual inflation falling from 8.45% in 2022 to 3.24% in 2023, and a bear market in 2022-23, adoption has slowed.
While interest and adoption are growing among the tech-savvy population, there is still a significant portion of the population that is either unaware or skeptical of cryptocurrencies, highlighting the need for comprehensive awareness and education efforts.
The Association of Blockchain Peru (ABPE) was established in October 2021 and currently has 1,044 cryptocurrency enthusiasts on its meetup page. The association is dedicated to promoting the blockchain adoption process and interacting with government, private sector, and academic entities to regulate the proper use of blockchain technology in the country.
ABPE also promotes several blockchain initiatives, use cases, and solutions so that they can be applied by other public or private institutions.
Inspired by the Bitcoin Beach proposal in El Salvador, Peruvian NGO Motiv is building Bitcoin-based circular economies in 16 towns in the country — three in the capital, Lima, and others in more remote areas. The organization accepts cryptocurrency donations to support their work and has won multiple awards in 2023.
By teaching participants how to create and use digital wallets, encouraging merchants to pay their employees in Bitcoin, incentivizing wholesalers to accept Bitcoin as a means of payment, and teaching locals entrepreneurship, the NGO stimulated Bitcoin usage and adoption within the community, reducing reliance on traditional banks.
Regulation:
The bill numbered 1042/2021-CR, also known as the “Core Act on the Commercialization of Crypto-Assets”, proposes to regulate companies that provide services related to the use and exchange of digital assets and cryptocurrencies through technological platforms.
The bill, which was introduced by legislator José Elías Ávalos in December 2022 and is currently under consideration, grants Bitcoin the status of "asset with accounting value" and places primary responsibility on investors when using digital assets. In addition, the bill proposes the creation of a public register of cryptocurrency service providers and a mandatory commitment to report "suspicious transactions" to the Financial Intelligence Unit by default. Unlike El Salvador, cryptocurrencies will not be recognized as legal tender.
The Central Reserve Bank of Peru (BCRP) is developing its own digital currency. After publishing their CBDC white paper, BCRP now has help from the International Monetary Fund. The next stage is to engage with stakeholders such as representatives of the financial services, fintech and technology industries, collect feedback and enter a pilot phase.
Peru has taken a more cautious approach than some of its neighbors. While open to the potential of cryptocurrencies, the government emphasizes consumer protection and is keen to establish a robust regulatory framework before fully embracing the crypto industry.
Key Players :
Agente BTC , Buda . com , Buenbit , Peruvian Crypto Bank , Binance , Kraken , Pachacuy , Qolkrex , Kaytrust Criptovision , Kindly , Unisuam , Fireblocks , Cryptometales , Algorand , CoinCaex , Sumara Hub Legal , Adolfo Ibañez University , Metary , Buenbit . com , EY , Sura Gaming , Axie Infinity
Venezuela
Ecosystem:
Venezuela is a great example of a country that has failed to adopt cryptocurrencies due to a centralized, government-first approach, but has seen strong user adoption out of necessity. In the 2023 Global Cryptocurrency Adoption Index, Venezuela ranked 40th, with the fourth-highest cryptocurrency adoption rate of any country in Latin America.
The failure to adopt cryptocurrencies in a centralized manner can be blamed on corruption and lack of trust. The Venezuelan government shut down the oil-backed national cryptocurrency, the Petro (PTR), which was designed to circumvent U.S. financial sanctions against Venezuela. Launched six years ago, the Petro was never adopted by the public and became part of a corruption scandal involving the head of SUNACRIP (cryptocurrency regulator) and the Minister of Energy.
So why is grassroots adoption so strong? The main reason is currency devaluation, a result of the government's failure to control inflation. Annual inflation has never been below 100% since 2014, reaching 190% in 2023. Amid a significant devaluation of the Bolivar, Venezuela remains a growing cryptocurrency market denominated in U.S. dollars. Venezuelans received $28.3 billion in cryptocurrency in 2021. In 2022, the country received $37.4 billion, an increase of 32%. This trend looks set to continue as we head into the bull run in 2024.
Venezuelans have embraced stablecoins due to high inflation, with stablecoin transactions accounting for 34% of all small retail transactions in the country — the largest figure in Latin America.
The adoption of stablecoins was driven by the failure of fiat currency (the Bolivar) and the need to establish new ways of exchanging value (i.e. stablecoins/cryptocurrencies). Stablecoins using low-fee blockchains like Polygon, Tron, and Solana make it easier and more accessible to store wealth, protect it from inflation, and receive funds overseas.
Venezuelans are finding sources of income through cryptocurrencies and are the largest community on decentralized social media platform Hive, and the second largest community on Play-to-Earn game Axie Infinity.
Crypto projects are trying to establish themselves in Venezuela, as the soil there is fertile for adoption. Many Venezuelans work in the cryptocurrency space as community managers, translators, and designers. Due to political instability, cryptocurrency projects operate from overseas, and some influential members of the ecosystem currently reside in other countries.
In October 2023, the Caracas Blockchain Week event took place, bringing together industry leaders.
Public government officials have received part of their salaries in Petro in the past, and most citizens have at least some basic understanding of the cryptocurrency.
The country is home to many different communities and major projects using Bitcoin, Bitcoin Cash, Ethereum, DASH, EOS, Polkadot, and Litecoin, as well as exchanges such as Libertex, Surbitcoin, and Paxful. Shapeshift is a DeFi platform operating in the country.
Regulation:
In 2019, Venezuela created SUNACRIP, a government office dedicated to regulating cryptocurrencies in the country. The agency was closed in March 2023 amid a corruption scandal, with plans to reorganize and reopen in March 2024.
The clearest legal framework is related to mining: if a user intends to mine in Venezuela, they need to apply for a license, and the same applies to exchanges. Legislation used to revolve around the Petro, and now that the Petro has been abandoned, let’s see how the ecosystem will adapt.
In 2022, Venezuela passed a bill imposing a tax on any currency not backed by the government, ranging from 2% to 20%.
Key Players:
Amberes and CrytoLago (government-backed exchanges), Cryptobuyer, Locha Mesh, SUNACRIP, Paxful, Dash, Axie Infinity, Tether, Hive, CryptoMiner, Shapeshift, Libertex
Chile
Ecosystem:
Chile ranks 68th in the 2023 Global Cryptocurrency Adoption Index, down 12 spots from the 2022 index. Currently, 410,149 people in Chile, or 2.01% of the population, own cryptocurrency.
Chile is no stranger to blockchain conferences, including the Bitcoin Chile meetup in Santiago in November 2023 and the Ethereum Santiago event in September 2022, where more than 40 experts presented and discussed topics such as DeFi, NFTs, CBDCs, and DAOs. Chile will host the International Blockchain and Cryptocurrency Conference (ICBC) in September 2024.
According to Statista, 15% of Chilean respondents said they owned or used cryptocurrencies in 2023, compared with 14% in 2022 and 12% in 2020.
In 2022, Chile's economic growth slowed due to rising inflation/interest rates and growing political uncertainty (including the rejection of a new constitutional amendment proposal in a national referendum). However, in 2023, inflation fell significantly, from 12.8% in 2022 to 3.94% in 2023, indicating that the situation in Chile's economy has eased. By 2024, Chile has reduced interest rates to 7.25%, and inflation is expected to be 3% in 2024.
One of the most notable cryptocurrency initiatives in Chile right now is Mercado Libre, Latin America’s largest e-commerce company by market value. Mercado Libre recently enabled cryptocurrency transactions and payments in its digital wallet Mercado Pago through a partnership with Ripio.
Bitfinex invested in Chilean cryptocurrency exchange OrionX in 2023 and plans to expand to Peru, Colombia and Mexico, with the goal of exceeding 1 million users in the region by the end of 2024.
Cryptocurrency is currently the third most popular investment asset for Chileans. National cryptocurrency exchanges have seen a 50% increase in stablecoin trading in 2022 as residents seek to protect their assets from inflation and the plunge in the Chilean peso.
Two blockchain projects that have gained traction in Chile presented their use cases in Santiago in 2023: Endangered Tokens and Wbuild. The former is a regenerative finance initiative that claims to use crypto tools to create incentives for nature conservation, while the latter is a platform that allows tokenized and borderless real estate investments starting from $50. Wbuild grew 46% in the 6 months ending February 2024, and their growth prospects continue to look promising.
Another foreign project that has been successful in Chile is World coin. In a press release in September 2023, the company announced that World ID registrations exceeded 1% of the Chilean population.
The Central Bank of Chile, which revealed its initial blockchain experiments in late 2019, is still in the early stages of developing its own digital currency (CBDC), publishing its only report in May 2022. Nevertheless, the entity has shown interest in accepting digital payments. The bank will also hold a series of workshops, presentations and meetings with different partners to find the ideal design of the Chilean peso CBDC.
Regulation:
In January 2023, Chile implemented the so-called “Fintech Law” with the aim of promoting financial inclusion and competition in financial services through innovation and technology, although its implementing regulations are still being drafted.
Cryptocurrencies: While the law regulates the trading and custody of cryptocurrencies, topics such as lending or staking (yield) are not yet included in the proposal. In order to offer these services, Chilean fintech companies must register with the CMF (Financial Markets Commission) to obtain an operating authorization. Currently no bank in Chile offers services related to cryptocurrencies.
While the legal issuance process is still ongoing, a number of different institutions in Chile have already made official statements regarding cryptocurrency regulation. The CMF stated in June 2016 that crypto assets are not subject to stock market securities regulations, but can be used as a means of exchange as long as both parties agree, although they must comply with the AML/CFT regulatory framework.
Regarding AML/CTF, in its 2021 Alert Signals Guidelines, the UAF (Financial Analysis Unit) disclosed its intention to guide agencies regarding the characteristics and behavior of potentially suspicious transactions or individuals. In 2019, the Central Bank of Chile stated that crypto assets can be used as a means of exchange and investment, although they are not considered legal tender.
Key Players:
ONG Bitcoin Chile , Mercado Pago , OrionX , Buda .com , CryptoMKT , Colledge , W orldcoin , Bitfinex , Endangered Tokens , W Build , Eth Chile
Ecuador
Ecosystem:
Ecuador ranks 43rd in the 2023 Global Cryptocurrency Adoption Index and 5th in Latin America, down from 18th in the world in 2022. According to Triple A, there are currently 695,148 cryptocurrency owners in the country, equivalent to 3.82% of the total population.
Ecuador has a relatively stable economy since adopting the U.S. dollar as its national currency in 2000. The country is one of the most notable cryptocurrency adoption cases in Latin America as of January 2024.
The country is one of the producers of more than 30% of the world's banana production, and Ecuador ranks fifth among Latin American countries in terms of cryptocurrency value received between June 2022 and July 2023, with billions of dollars pouring into the Ecuadorian economy during this time, according to the 2023 Crypto Geography Report.
The country’s traditional fish and shrimp market has seen significant growth with the help of this technology, a market that relies heavily on two factors: traceability and awareness of the origin of the product. The use of blockchain technology has facilitated significant growth in the market over the past decade, as highlighted by the Sustainable Shrimp Partnership (SSP) with its five-year partnership with the IBM Food Trust.
As of March 2024, there is only one cryptocurrency ATM operating in Ecuador, located in Cuenca. According to Coin ATM Radar, it currently allows people to buy various cryptocurrencies, although according to Coin map, there are 36 venues that accept cryptocurrencies as a payment method. Ernst & Young Global Limited published a case study on the implementation of blockchain by an Ecuadorian energy production company, which implemented blockchain throughout its production and transmission chain, focusing on the carbon footprint of operations. The company's internal systems were promptly upgraded after implementing DEEP (Digital Energy Enablement Platform). This allows the company to track the carbon footprint of each link in the production chain and obtain more data to improve transparency, security, and the quality and capacity of data processing, while reducing costs.
In February 2023, Ecuador became the first country in Latin America to apply blockchain technology to its electoral process, specifically a transparency record and audit system. This was the result of a partnership between the Ecuadorian company Eminkatech and the Chilean company ZEYO, which has representation in the country. The same service provider worked with the National Electoral Council (CNE) during the presidential elections in October 2023.
One of the largest companies using cryptocurrency in the country is Despegar, a Peruvian company and one of Ecuador’s main tourism service providers. This is particularly significant in a country where almost 30% of the banked population has already conducted some type of cryptocurrency-related transaction, according to data from Minsait Payments.
Ecuador has hosted a number of relevant cryptocurrency and blockchain events, most notably the “Pathway to Blockchain Week” in May 2023, hosted by ETH Tricolor/ETH Ecuador, the largest blockchain and cryptocurrency community in Ecuador, which recently announced that it is becoming a DAO.
Regulation:
The Ecuadorian government's legal approach to cryptocurrencies, especially Bitcoin, is characterized by cautious pragmatism. The Central Bank of Ecuador first announced in 2018 that cryptocurrencies were not authorized as a means of payment, but the bank recognized the legality of buying and selling cryptocurrencies online. This position was further reinforced in Article 94 of the Monetary and Financial Law, which explicitly denied the legal tender status of Bitcoin and similar digital currencies.
This legal framework, which defines the boundary between permitted cryptocurrency transactions and their restricted use as a traditional medium of exchange, exposes the outward perception of cryptocurrencies among the Ecuadorian people, primarily as an alternative investment option rather than a means of daily payment. Regardless, the country’s widespread adoption of cryptocurrencies is pushing the Ecuadorian government to find a balance between promoting innovation in the financial sector and protecting the country’s fiscal interests.
Finally, on August 21, 2023, the Monetary Policy and Regulatory Council issued a resolution on digital wallets, presenting a series of requirements for Ecuadorian companies to offer this type of product on the market. It states that only entities with specific licenses can provide digital wallet services and emphasizes the need for constant and immediate availability of holders' funds.
The resolution also covers auxiliary payment systems for clearing payments between different players in the financial sector, corridors for remittances, coverage and powers for deposit-taking and digital payment companies, in addition to creating a sandbox with the private sector and providing temporary licenses to selected companies so they can operate and test technology.
Key Players:
ZEYO , Ethereum Ecuador , Road to Blockchain Week , Ernst & Young , eToro , Deribit , IBM Food Trust
Dominican Republic
Ecosystem:
The country’s cryptocurrency market has steadily developed over the past few years, with adoption continuing to grow, despite the release of restrictive (but unenforced) regulations in September 2021. The Dominican Republic ranks 71st in the 2023 Global Cryptocurrency Adoption Index, down 28 spots from the 2022 index.
More than three in ten of the banked population in the Dominican Republic have already purchased some type of cryptocurrency. According to research conducted by Minsait Payments (page 86), the majority (72%) of use cases to date are for investment, with 21% for daily use/payments; NFT trading accounts for another 9.8%. The report specifically notes that the Dominican Republic is the Latin American country with the highest percentage of banked population willing to use cryptocurrency for payments: 25.1% of respondents said they would definitely use cryptocurrency, while 12% said they would probably use it as a means of payment.
In 2023, the "Running with Bitcoin" meetup was held in the Dominican Republic, during which Paco de La India shared his experience of traveling to more than 40 countries (15 of which were in Latin America) using Bitcoin and spread the idea of Bitcoin.
Educational programs are becoming more common in the island nation, and one notable one is “My First Bitcoin.” Developed by Bitcoin Dominicana, the program aims to democratize access to digital finance by teaching cryptocurrency basics and advanced applications.
Crypto services are becoming increasingly popular. Companies like BitcoinRD (founded in 2015) offer cryptocurrency exchange services and provide twelve BTC ATMs across the island.
Athena Pay provides businesses with a way to accept cryptocurrencies, while Paxful, the country’s largest Bitcoin P2P, offers exchange and educational services. The two companies are strengthening their position in the Dominican Republic’s economy by providing innovative services that promote financial inclusion, one of the six strategic goals of the Superintendency of Banking of the Dominican Republic.
Regulation:
The Central Bank of the Dominican Republic issued a statement on cryptocurrencies and virtual currencies in September 2021, stressing that crypto assets are not “supported or authorized by the Monetary Board for use in any type of transaction throughout the country as a means of payment; this means that they do not have the effect of legal tender or of releasing public or private obligations.”
The statement also repeated the 2017 text, stating that “regulated institutions of the national financial system are not authorized to use or operate (crypto-assets) in the payment system of the Dominican Republic. Anyone who acquires such virtual assets as an investment, or who is interested in using them as a means of payment, as well as anyone who accepts them as a form of payment in a commercial transaction, does so at his or her own risk.”
In contrast, Héctor Valdez Albizú, the governor of the Central Bank of the Dominican Republic, showed a notable interest in CBDCs in 2021. He said the central bank was completing research and exploration of the monetary impact and functionality of CBDCs. In the same year, Albizú stated that the Dominican Republic maintains a digital agenda and proposed the creation of a digital currency financial innovation center to address issues such as instant payments, cross-border payments, and digital identity to improve the country's economy.
Despite the restrictive stance of central banks towards the cryptocurrency market, enforcement in this area has been lax. Companies and individuals that adhere to anti-money laundering and international standards have begun using/accepting cryptocurrencies, allowing the market to gradually take shape and develop over the past few years.
However, government scrutiny has been intense in some high-profile cases, such as the bankruptcy of Harvest Trading Cap, a popular company in the Dominican Republic that was unable to repay customers’ funds after its stock price plummeted in early 2022 due to Bitcoin capital flight.
Key Players:
Bitcoin Dominicana, Bitcoin RD, Paxful, Athena Pay, LACChain
El Salvador
Ecosystem:
El Salvador has been actively creating incentives to promote cryptocurrency adoption since 2021, successfully attracting businesses and tourists to the country. However, the country has had difficulty promoting adoption among its own citizens.
It will be interesting to see how the 2021 Bitcoin Act will be affected by the 2024 bull run and how it will impact the ecosystem. El Salvador ranks 95th in the Global Crypto Adoption Index, down from 55th in 2022. This is due to the low overall adoption rate and the inclusion of DeFi as a criterion in the Global Crypto Adoption Index.
El Salvador's inflation rate in 2023 was 1.23%, and remittances were US$8.18 billion, an increase of 4.63% from the previous year, accounting for almost 30% of the country's GDP.
Despite crypto-friendly regulations, El Salvador is experiencing a paradox, as shown by the remittance landscape. While remittances through traditional financial channels are growing, cryptocurrency remittances are declining. The Central Bank of El Salvador reported that cryptocurrency remittances fell to $82.93 million in 2023, compared to $116.4 million in 2022, compared to an all-time high of $8.18 billion for overall remittances.
El Salvador’s cryptocurrency adventure, led by President Bukele, has experienced a dynamic trajectory. An initial $100 million investment in Bitcoin and $275 million in the launch of the Chivo wallet, while accepting Bitcoin as legal tender, demonstrate a strong push to integrate cryptocurrencies into the national economy. Despite initial setbacks with the wallet, low adoption, and criticized governance practices, the profitability of Bitcoin investments, the growth of tourism, and the expected bull run suggest that 2024 and 2025 could see a turnaround.
President Nayib Bukele was successfully re-elected on February 4, 2024, and will continue to serve as president for the next five years. He will face many economic challenges, and he is betting on cryptocurrencies to bring prosperity to his country by becoming the financial center of Latin America.
Bukele's investment in Bitcoin is now profitable, with an accumulation of approximately 2,464 BTC. According to the "Nayib Tracker" website, the Bitcoin investment is currently worth approximately $122.01 million. The overall investment has a profitability rate of approximately 57.28% at the time of writing (March 6, 2024), which is equivalent to approximately $69,576,138. The current average cost per share (DCA) of El Salvador's Bitcoin investment is $42,548.37.
In December 2023, the El Salvadorian Congress approved all regulatory infrastructure for a volcano bond that will purchase $500 million in Bitcoin, finance a renewable energy-based mining industry, and provide investors with a 6.5% annual return.
A noteworthy aspect of El Salvador’s cryptocurrency strategy is the introduction of an investor visa program. The Freedom Visa Program aims to attract crypto entrepreneurs and provide a favorable environment for blockchain innovation and cryptocurrency-related businesses by offering them permanent residency in exchange for a $1 million investment in Bitcoin or USDT. Investors who invest $100,000 in Volcano Bonds are eligible for citizenship after 5 years of residency.
Overall, despite the financial challenges that El Salvador faces, including debt negotiations and market uncertainty, its commitment to promoting a crypto-friendly environment could set a precedent for other countries exploring similar initiatives.
If volcano bonds are successful, they will pave the way for other countries with similar characteristics to El Salvador to implement alternative funding initiatives — from establishing friendly regulatory frameworks for cryptocurrencies to accessing capital markets and developing public policies that incentivize web3 development.
Due to El Salvador's crypto-friendly regulations, many companies are investing in the country: the central bank said that there are currently 59 cryptocurrency and blockchain companies with registered offices in the country. Examples include Bitfinex Securities, Strike, and cryptocurrency trading platform Paxful, which opened the "House of Bitcoin" in El Salvador, a Bitcoin education center that provides free Bitcoin-related learning opportunities. However, several businesses and investors left the country last year, complaining about poor execution and "lack of motivation."
Besides attracting businesses, tourism is also growing.
Regulation:
The government passed the Bitcoin bill in 2021, making El Salvador the first country in the world to officially adopt the Bitcoin standard. Latin America's most crypto-friendly ecosystem will continue to be committed to the cryptocurrency movement after Bukele's reelection. The legislation came into effect on September 7, 2021, and Bitcoin has become legal tender since then. Due to its legal tender status, Bitcoin is not subject to capital gains tax.
In December 2023, Congress approved a bill for the full adoption of crypto assets, aiming to make El Salvador a hub for crypto innovation. The legal framework establishes the National Digital Assets Commission and the Bitcoin Fund Administration, which will manage, protect and invest funds from public digital asset issuances conducted by the government.
As the legislation states, “The purpose of this Act is to establish a legal framework that provides legal certainty for transfer operations that are used to transfer ownership of any digital asset used in a public offering.” The bill creates the legal basis for Volcano Bonds.
On April 19, 2023, the National Assembly passed the "Law on the Promotion of Innovation and Technological Manufacturing". The law provides for 15 years of tax exemption on income and capital gains taxes, municipal taxes on company net assets, and import duties on raw materials, machinery, equipment and tools for investments related to new technologies.
It will be worth keeping a close eye on regulatory and ecosystem development in El Salvador. The regulatory environment is already in place, which means the country should be able to receive significant capital inflows during the next bull run (2024-2025).
Key Players:
Government of El Salvador, Chivo Wallet, Bitcoin Beach, Strike, Blockstream, AlphaPoint, Paxful, Algorand, Bitso, BitGo, Koibanx, Bitfinex Securities, Athena Bitcoin.
costa rica
Ecosystem:
Costa Rica ranks 92nd in the 2023 Global Cryptocurrency Adoption Index, down 27 spots from 65th in 2022.
Cryptocurrencies are widely adopted in Costa Rica, with many businesses accepting them as a means of payment — not surprising, since workers can receive a portion of their wages in crypto, and there are 6 Bitcoin ATMs in Costa Rica for a population of just 5 million.
The country, known as “Pure Life,” has quickly embraced blockchain technology and cryptocurrencies and has a vibrant ecosystem as a result. Costa Rica has become a cryptocurrency hub due to high demand from businesses to incorporate the technology into their systems and accept it as a means of payment.
The vibrant cryptocurrency ecosystem has spawned an active blockchain association: Asos Blockchain promotes activity and frequently brings together the country’s leading web3 builders at events such as The Tico Blockchain Conference and the community-led Crypto Cantina.
Costa Rica has stable and reliable internet connections, as well as one of the world’s largest renewable energy outputs — 98% of its energy is renewable, making it one of the “greenest” countries on Earth and attractive for cryptocurrency mining projects.
Grassroots adoption is ongoing: the Bitcoin Jungle community has expanded from Dominican Beach to the Golden Triangle region of Costa Rica (Dominican, Uvita, Ojochal, Platanillo, Tinamaste).
The community is actively promoting meetups and educational efforts, and the initiative helps sellers save money on credit card fees (up to 8%) while also incentivizing Bitcoin enthusiasts to visit the surf town. The experiment was inspired by the successful El Zonte Bitcoin Beach, which was launched by cryptocurrency enthusiasts.
The Blockchain Jungle conference aims to position Costa Rica as a global hub for sustainable blockchain technology. Speakers like Nick Szabo and Costa Rican Minister of Science and Technology Paula Bogantes are participating in the November 2023 event.
Costa Rica has launched its own ReFi Node with the goal of incubating regenerative finance projects and promoting collaborative enterprises in the region. Another notable project is Cambiatus, a blockchain-based platform for creating complementary currencies. The thriving Monte Verde community uses the platform to increase green awareness and reward volunteer work, driving local economic growth in the wake of pandemic-related adverse impacts on tourism, a major economic activity in the region. Since launching in December 2020, Verde’s community currently has over 2,800 members and is still growing. Cambiatus also facilitated the creation of CoFi Blocks in 2022, a collaborative enterprise led by coffee producers.
In the private sector, Edenia is an initiative led by builders of the web3 ecosystem, assisting with bare metal infrastructure servers, acting as a development lab, and providing validator services for multiple blockchains such as: Bitcoin, Ethereum, Polygon, Dash, EOS, TELOS, Libre, LACChain, and more.
Cryptocurrency mining is also an interesting area. In early 2022, a hydroelectric plant that had been operating for 30 years changed its business model and began mining Bitcoin. In 2023, Evergreen Sustainable Enterprises launched a hydroelectric Bitcoin mining facility in Costa Rica. The sustainable facility has electricity costs as low as $0.02 per MWh, making the breakeven point for the BTC market price as low as $10,145.
Regulation:
Costa Rica aspires to become a crypto-friendly country with minimal taxes on cryptocurrencies. Congresswoman Johana Obando has proposed a Markets in Crypto-Assets (MECA) bill to regulate the cryptocurrency market, provide clarity and protection for individuals and companies investing in crypto assets, while fostering an ecosystem to attract investment.
The proposed bill would prevent the government from taxing cryptocurrencies used to purchase goods, exempt cryptocurrencies held in cold storage and profits from cryptocurrencies produced by the mining industry from taxes. However, profits from cryptocurrency trading would be subject to income tax.
Lawmakers want the Costa Rican government to recognize cryptocurrency for what it is and allow people to freely hold and use it. The goal is to eventually attract foreign investors, fintech companies and tourists, and create jobs for Costa Ricans in the technology and tourism sectors. Costa Rica's regulations differ from El Salvador's - it does not force anyone to accept Bitcoin, but makes it possible if both parties agree.
Currently, the Central Bank of Costa Rica does not regulate cryptocurrencies, but they are legal and recognized as a legitimate means of payment.
A 2017 government statement explained the lack of responsibility and regulation of cryptocurrency operations by state agencies, advising users to use them “at their own risk.”
The Central Bank of Costa Rica (BCCR) does not regulate nor enforce the use of cryptocurrencies, as they are not issued or backed by the central bank. According to Tico Times, "Article 166 of the Labor Code states that the use of commonly accepted assets as a means of payment is permitted under Costa Rican law." Therefore, employees can receive part of their salary in cryptocurrency. Salaries must be paid in fiat currency (government-issued currency) up to the minimum wage, and the remainder can be paid in cryptocurrency.
In November 2021, the Costa Rican tax authorities proposed a proposal to tax crypto assets, proposing a 13% VAT on the purchase of crypto assets, in addition to a 15% capital gains tax. This proposal is not expected to pass as it would hinder Costa Rica's cryptocurrency ecosystem and hinder innovation.
Key Players:
