According to a recent report by blockchain analytics firm Chainalysis, Latin America has shown a distinct preference for centralized exchanges when compared to the rest of the world. The report, published on October 11, highlights that Latin America ranks seventh in terms of its crypto economy, trailing closely behind other regions such as the Middle East and North America, Eastern Asia, and Eastern Europe. However, the report notes that users in Latin America strongly favor centralized exchanges and deviate slightly from institutional activity compared to other regions.
Furthermore, the report highlights that in some countries within the region, crypto activity by platform type significantly exceeds the global average. The worldwide average for preferences regarding crypto platforms stands at 48.1% for centralized exchanges, 44% for decentralized exchanges, and 5.9% for other decentralized finance (DeFi) activities. However, in Venezuela, the preference for centralized exchanges is significantly higher at 92.5%, while decentralized exchanges have a much lower preference of 5.6%.
The report also identifies a unique reason for Venezuela’s surging adoption of cryptocurrencies. This is primarily attributed to a “complex humanitarian emergency” that the country is experiencing. Amidst the COVID-19 pandemic in 2020, crypto played a pivotal role in directly assisting healthcare professionals in Venezuela. For this reason, crypto became a necessary form of value as traditional payments were difficult due to the government’s refusal to accept international aid, influenced by political reasons.
Colombia, on the other hand, shows a 74% preference for centralized exchanges, while decentralized exchanges account for just 21.1% of their preferences. Meanwhile, Argentina leads in terms of the sheer volume of cryptocurrency transactions in Latin America, having received an estimated $85.4 billion during the 12-month period ending on July 1.
Chainalysis’ Global Crypto Adoption Index reveals that three Latin American countries secured positions in the top 20 ranks. Brazil stands at the 9th position, followed by Argentina at 15th, and Mexico at 16th. However, at the global level, India claims the leading spot, with Nigeria and Vietnam securing the second and third positions, respectively.
The report demonstrates that Latin America’s preference for centralized exchanges is a notable trend within the region. While the rest of the world may have a more balanced distribution between centralized and decentralized exchanges, Latin American users have shown a strong inclination towards centralized platforms. This sheds light on the unique nature of crypto adoption and usage patterns in Latin America, which can have implications for the region’s future development in the blockchain and cryptocurrency space.
Overall, Latin America’s cryptocurrency economy continues to grow, with countries like Argentina and Brazil making significant strides in terms of transaction volumes and adoption. The region’s preference for centralized exchanges highlights the need to understand the specific factors and dynamics that influence crypto usage in different parts of the world. As the crypto industry evolves, it will be interesting to see how Latin America’s crypto economy further develops and whether there will be a shift towards decentralized exchanges in the future.