Latin America at the Center of the Crypto Revolution

Laura Gaviria from the SoftBank Team shares her perspective on why Crypto adoption in Latin America is lagging compared to the rest of the world.

Posted on
January 12, 2022
by
Laura Gaviria Halaby

Latin America at the center of the crypto revolution

SoftBank is best known in the region for its financial investment through the Latin America Funds ($8B in total, +80 companies in our portfolio, and almost 2/3 of the unicorns in the region). Today just a few companies are leveraging Web3 in their business model, and I estimate that eventually 100% of our portfolio companies will leverage crypto to power their business.

Latin America has the chance to be at the center of the Web3 revolution as the core principals of Web3 align beautifully with the Latin American reality:

  1. Ownership - Web3 provides more control to users and increases opportunities for them to monetize their work
  2. Governance - Web3 offers decentralized systems, whereas large tech platforms can’t change policies for users centrally
  3. Incentive alignment - Web3 builds trust in how users transact with one another, and as a result, it’s helping to bring more consumers online

Most emerging markets live in constant political and economic instability. Latin America has not been the exception, and technologies that offer regaining back stability through decentralized mechanism where individuals can trust each other become priceless.

In addition, compared to other emerging markets, LatAm has extremely high internet adoption and a strong remittances market, which create an environment where technologies and solutions powered by blockchain and crypto can thrive.

Crypto adoption in Latin America is lagging compared to the rest of the world.

Once dubious, traditional VC firms are getting into crypto. From 2016-2020, traditional funds invested in more than 80 crypto investments in Latin America, but in 2021 alone, those same funds invested in about 90 crypto investments. Crypto is now a mainstream asset, with institutional investors allocating a percentage to the space and the rise of the NFTs, making easier for retail investor to participate in the space (NFTs experienced a growth of 6500% from 2020-2021)

But crypto funding in LatAM is lagging compared to the rest of the world with 10 times less deals than the US in 2021, even though Latin America is one the regions with the most crypto users in the world. Approximately 15% of the population holds or uses crypto, Argentina has been at the center of Web3 innovation, and El Salvador is the first country to adopt bitcoin as a legal tender.

LatAm must ape into Web3

Latin America can leap from into Web3 and stay ahead of the innovation curve. Similar to the AI revolution, where companies needed to embrace this tool to sustain their competitive advantages, once again they need to embrace blockchain and the power of crypto to stay ahead of the curve.

The best way to start is understand the foundations and start unlocking new business models and efficiencies that can be created by the technology. On the financial side, for example, there are new loan models through DEFI (decentralized finance) that provide flexibility that wasn’t available to you before. Other examples include new ways to align incentives and governance in communities, new forms of IP and new ways to manage identity.

While we’ve seen massive growth, we’re still early when it comes to blockchain and its potential. A good way to think about it is by thinking back to the launch of the iPhone in 2007. We could never imagine that one day you’d be able to order a car from your phone or stream music. Companies like Uber and Spotify exist because tech rails were built for apps, and it’s paramount that we think about what companies could be built on blockchain.

Watch the Operator School Session on Crypto, led by Meltem Demirors, Chief Strategy Officer at CoinShares: https://youtu.be/hKztK9khlxs

Laura Gaviria Halaby
Head of Knowledge, Strategic Partnerships and Crypto Value Creation, SoftBank Latin America Fund