The study "crypto asset ecosystem in Latin America and the Caribbean" from the University of Cambridge invites us to delve into the “crypto landscape” of Latin America and the Caribbean. Supported by the comprehensive analysis of the Cambridge Centre for Alternative Finance (CCAF) in collaboration with the Inter-American Development Bank (IDB), this 2022 study provides a window into the rapid growth and dynamic transformations characterizing the crypto asset sector in the region.
Through surveys, research, and interviews with key stakeholders, the study guides us through the complexities of the “crypto-asset ecosystem”, from industry development to shifting perceptions and regulatory challenges. The study invites us to explore how crypto asset companies in Latin America and the Caribbean (LAC) are evolving into cutting-edge financial service providers. The remarkable growth of this market, which transcends borders and its rapid expansion, increasingly compels regulators to modernize and evolve in response to these fast-occurring technological changes. This analysis not only provides a snapshot of the crypto asset market in LAC but also encourages reflection on the future, where innovation and regulatory challenges are intertwined in the fascinating narrative of the crypto asset landscape in the LAC region.
Conducted between June and August 2022, the study collected 52 responses from the private sector (private companies involved in crypto-asset-related activities) and 31 responses from public institutions (Central Banks, Financial Regulators, and Superintendencies) in the LAC region. The survey of the private sector highlighted the evolution of the industry structure, observing how crypto asset companies are becoming full-service financial technology providers, offering a wide range of services. Among the most common services are the buying and selling crypto assets, payments, custody, and educational services. These services, in general, aim to simplify the complexity of Blockchain technologies, attracting users with little or no previous knowledge of crypto assets.
Market growth is another outstanding aspect, with crypto asset companies expanding their operations beyond their home countries to other jurisdictions in the region, with a special focus on Brazil, Argentina, and Colombia. This growth phenomenon is reflected in the significant increase in the number of users and has a positive impact on employment in the LAC region.
In terms of innovation, the study examined regulators' attitudes toward crypto assets, revealing trends that, in the years leading up to the study, have viewed the development of crypto markets favorably. A significant percentage of public sector regulators expressed a more positive attitude toward crypto assets than five years ago. Additionally, cryptoasset companies perceive that regulators have a better understanding of this technology, and since 2020, they have experienced increased interaction through innovation centers and regulated testing environments (sandbox).
According to the study, overall, the perception and use cases of cryptoassets have transformed how regulators understand this market. The analysis finds that, for the most part, regulators view crypto assets as useful tools that can bring the population closer to a more inclusive financial landscape. Remittances and cross-border payments emerge as significant use cases in Latin America and the Caribbean, marking a shift from the years before 2020, where profit-seeking through crypto price changes predominated.
As is the case globally, in LAC, cooperation between the industry and regulators is seen as essential for the growth of a secure and innovative crypto asset ecosystem that results in progress for the region. Even in light of this, and the importance of public-private cooperation in a still loosely regulated world, such as that of cryptoassets, Fintech, and Blockchain, the majority of public sector respondents stated that their level of cooperation with local and especially international private companies remains low or nonexistent.
In terms of regulatory challenges faced by these types of assets, the study finds that the lack of clarity and a defined regulatory framework are identified by respondents as significant obstacles, both from the public and private sectors. Despite this, respondents agree that the absence of regulatory personnel with in-depth knowledge of crypto assets is one of the industry's greatest challenges, inviting the formulation of training initiatives and research development in this field.
In conclusion, the study highlights the dynamism of the crypto asset ecosystem in Latin America and the Caribbean, with substantial industry growth, changes in perception and use cases, and a more receptive attitude from regulators. However, regulatory challenges persist that require attention, and the need for greater cooperation between the industry and regulators becomes evident to ensure sustainable and secure development of this emerging sector. It is worth noting that while the study's findings offer a snapshot in time, the constant evolution of the global crypto asset industry suggests the importance of closely monitoring future developments in this dynamic and ever-changing area.
