Some Latin Americans are turning to cryptocurrency to access credit as a way to combat the difficulty of borrowing money from traditional banks there.
The problem has become especially apparent with the high interest rates and inflation in recent months. In 2020, as the pandemic hit, Latin American central banks rose interest rates early — and they raised them further in 2021 and 2022. This caused traditional banks’ lending rates to grow exponentially, a CoinDesk report says.
Brazil has the second-highest interest rate in the world at 13.75%, with Argentina being the first by far, with 75% as of September this year. Private banks have been risk-averse enough to make it “impossible” for citizens to repay loans, particularly with inflation.
So there’s been more growth for crypto platforms, which can offer up to 50% lower rates and zero maintenance fees.
Canadian lending platform Ledn, which has been operating in Latin America since 2019, is among the companies benefitting. The Latin American region makes up half of the loans the company grants. Ledn co-founder and Chief Strategy Officer Mauricio Di Bartolomeo said that the adoption of cryptocurrencies in Latin America has made it so “people had to sell their bitcoins to spend on their daily lives.”
“That was when we saw credit could help people grow their businesses or projects without selling their crypto,” he said.
In other news of Latin American crypto payments, crypto exchange Huobi Global is working with AstroPay, an online payment solution, to bring fiat-to-crypto pay services to Latin America, PYMNTS wrote.
Read more: Huobi Teams With AstroPay for Latin American Fiat-to-Crypto Payments
The agreement will see Huobi Global users able to access AstroPay’s payment platform to buy crypto assets with fiat money.
“Latin America lays claim to a young and vibrant population brimming with enthusiasm for the crypto industry, and we have observed a significant increase in the number of new Huobi Global users from this region,” Huobi Global CFO Lily Zhang said in a press release.