Posted 7 months ago | by Ben Armstrong

COVID-19 Boosts Crypto Use in South America – Poor Governments Will Drive Use Higher

The global political reaction to COVID-19 has been terrible for the real economy – and one region that has been especially hard-hit is South America. Even before 2020, many nations in South America were struggling with economic woes and political scandals.

For those of you who don't follow South American political trends, the mid 1980s marked the end of extreme right wing politics in many South American nations, and until the swing left ended sometime in the area of 2015, South American nations were spending like crazy.

As it turns out – it is pretty easy to keep your political part in office by giving money away. Of course, these programs took the form of 'social spending', which is a fancy way of saying 'buying votes'.

At the moment the best example of this left wing revolution is Venezuela – which now resembles one of Dante's circles of hell. McDonald's no longer uses potatoes due to the cost – and basic medical supplies are all but impossible to obtain.

South America is Going Crypto in a Big Way

A full look at how stupid South American politicians are is well beyond the scope of this article, and there is no shortage of scandals to dive into. Needless to say, most South American nations are now facing terrible fiscal situations, and fiat currency will be used to inflate away the massive debts.

Argentina is an example of a nation that keeps reinventing its peso – in a vain attempt to stave off an existential crisis. The Argentine Peso has lost most of its value over the past few years, and it could fall much further before another currency crisis sets in.

As a result of this situation, the Argentine government uses capital controls to limit the amount of money that can flow out of the nation – as it thinks that capital flight would exacerbate the already terrible monetary situation.

The opportunity for crypto is clear – and it is almost universally valid in South America.

The Choice is Crypto

The fiat equation in South America is skewed to the government – and any person who has enough power to take assets offshore. For regular people in a nation like Argentina – fiat currency is a cancer.

All of this changes when crypto enters the picture, as it is totally out of the government's grasp. A government can make whatever laws it likes – but enforcement is another question entirely.

Given how badly the people of Argentina have been treated by their government – it should come as no surprise that a recent survey –

“...revealed that 73.4% of participants considered that, in the current economic scenario, cryptocurrencies are the most effective way to save and protect their funds.”

Traditionally many people in South America have used US Dollars or Euros to guard against government-led inflation, but that appears to be changing. There are some huge benefits that crypto offers regular people – and South Americans are embracing it in ever growing numbers.

A Manager at Paxful illustrated the shift to crypto in South America with hard numbers –

“During this year we have observed a major increase in the operations carried out by Argentine users on our platform, especially since the pandemic started, registering an increase of 37.5% in the volume compared to the previous periods.”

Honest Money Without Borders

Unlike fiat currency – which has to be kept in a physical form – crypto is held digitally – and can be send anywhere there is internet. These are massive advantages for anyone who has to deal with a horrendous domestic economy, and a government that is determined to abuse any power that it is given.

What is true today in South America will be happening in developed economies in the coming years – and may be far worse in both scale and scope. We are looking at a situation where there is nowhere in the established system to hide – which is great news for crypto investors.

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