The following article is an editorial by João Victor Alves Souza from Bitcoin Policy.
Stablecoins have increased in popularity in recent years alongside the broader digital asset market. It is worth noting that the stablecoin market is gaining importance in emerging economies, such as Brazil and other Latin American countries.
It is worth noting, Dollar ropeUSD Coin and other stablecoins are promoting a kind of silent dollarization in the Brazilian economy. Statistics on stablecoin adoption in the region reveal a growing interest in dollar-backed tokens.
Brazil and hyperinflation
Brazil and Latin American countries in general have a long history of inflationary crises. The country experienced several decades of high inflation and hyperinflation during the 20th century.
For this reason, investing in real estate, gold, and dollars has become popular over time. The economic situation in Brazil stabilized thanks to the Real Plan, which was implemented in 1994.
However, the threat of hyperinflation hit the Brazilian economy again. In just one year, the Brazilian real fell by about 25% against the US dollar.
Dollarization via stable currencies
Stablecoins are truly one of the most useful tools in the entire cryptocurrency market. It is not surprising that the market value of this sector now exceeds more than 200 billion US dollars.
It is worth noting that Brazilians and Latin Americans in general are increasingly looking for dollar stables.
Data from the Brazilian Federal Revenue Service showed that in July 2024, 4.1 million individuals registered transactions with digital assets. It is worth noting that Dollar Tether transactions represent more than 90% of the amount traded by Brazilians.
A Triple-A survey in May 2024 found that 26 million Brazilians had invested in the digital asset market. This number represents about 7.8% of the country’s population.
In addition, strange adoptions have appeared in recent years. Several reports indicate that dollar-denominated stablecoins were used for trading at 25 de Marco, the largest mall in Brazil, located in São Paulo.
Polo Ardoino, CEO of Tether Limited, noted this huge adoption in the Brazilian market:
“In the first quarter of 2023, USDT dominated crypto and stablecoin transactions in Brazil, with a total of 37.1 billion reais, representing 81% of the total value traded in cryptocurrencies and stablecoins during the first quarter.”
“Although Brazilian banks are still trusted as safe havens for funds, there is a growing market of residents using USDT for quick and easy access to the financial system. That’s why partnerships like SmartPay with Tether, which provides access to USDT in over 24,000 ATMs across the country, very important for residents who prefer to use Tether tokens over Pix to pay their bills or goods and services.
It is worth noting that the adoption of stables in emerging markets is a very positive thing for the US economy. This is because dollar stables are mostly backed by US government bonds. In this way, they help monetize the US federal government’s debt.
At the same time, the adoption of stables contributes to the deterioration of the national currency. This is because many Brazilians continue to replace the local currency with the digital dollar, which tends to impact the broader forex market.
This article was originally published by Brazilian cryptocurrency company Coinext.
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