Ripple (XRP): Latin America Shifts Towards Crypto Amidst Cash Ditch
Jessie A Ellis May 19, 2024 10:08
Latin America embraces digital payments, with a notable shift towards cryptocurrency due to post-COVID comfort with online experiences and unsettling inflationary issues.
Latin America's Embrace of Crypto
Latin America is seeing a significant shift towards digital payments, with the adoption of crypto assets being driven by continued comfort with online experiences post-COVID and unsettling inflationary issues in parts of the region, according to Ripple (XRP) insights. While consumer enthusiasm for cryptocurrency is high, its mainstream acceptance is yet to be achieved.
For the first time in history, cash no longer represents the majority of payment preferences in Latin America. Today, only 36% of consumer transactions are cash-based, and the shift toward digital payments is rapidly gaining momentum. As per global surveys, Latin Americans are more likely than their global peers to feel comfortable without physical wallets and are the most likely to believe mobile wallets will fully replace cash within the next decade.
Interoperability and Crypto Adoption
Despite the region's enthusiasm for digital currencies, Latin America suffers from a fragmented payments landscape, resulting in low interoperability and high fees for both payment senders and receivers. Regulators are working to enable real-time payment options that improve interoperability, increase financial inclusion, and protect economies from global market volatility. However, the advancement and adoption of these payment systems vary across countries.
Key Latin American markets, including Brazil, Argentina, Colombia, and Ecuador, are showing interest in digital asset adoption, particularly Central Bank Digital Currencies (CBDCs). Through CBDCs, these governments aim to protect against uncertain domestic macroeconomic conditions, circumvent capital controls, improve financial inclusion, and enable faster and cheaper payments. The adoption of digital assets also opens opportunities for the crypto and blockchain sectors to build payments systems that enable low-cost, faster, and seamless transactions.
The Role of Blockchain in Payments
Travelex Bank, the first specialized exchange bank to be approved by the Central Bank of Brazil, serves as a pioneer financial institution in Latin America using blockchain solutions for cross-border payments. By leveraging Ripple Payments, Travelex can support dramatically more efficient payments. With Ripple’s global payments network providing around-the-clock access to liquidity, real-time settlement, and local currency payouts, Travelex can overcome the challenges of establishing correspondent banking relationships while adhering to global compliance and security standards.
Challenges to Crypto Adoption
Despite the growing interest in crypto, barriers to digital payment progress persist. Many established banks perceive crypto as a threat and use their influence in the financial markets and regulatory and legal structures to slow down the adoption of upstart innovations. Also, financial institutions may choose to curb interoperability and maintain closed ecosystems to inhibit competition unless required by law. High banking fees and the fragility of some fintech models also pose challenges to the widespread adoption of digital payments.
Image source: Shutterstock