Some Latin Americans are turning to cryptocurrency to access credit to combat the difficulty of borrowing money from traditional banks there.
The problem has become particularly evident with the high interest rates and inflation of recent months. In 2020, as the pandemic hit, Latin American central banks raised interest rates early – and they raised them again in 2021 and 2022. This led to exponential growth in lending rates from traditional banks , a CoinDesk report said.
Brazil has the second highest interest rate in the world at 13.75%, with Argentina by far the first at 75% in September this year. Private banks have been sufficiently risk averse that it is “impossible” for citizens to repay their loans, especially with inflation.
So there has been more growth for crypto platforms, which can offer up to 50% lower rates and no maintenance fees.
Canadian lending platform ledn, which has been operating in Latin America since 2019, is among the companies benefiting. The Latin America region represents half of the loans granted by the company. Co-founder and Chief Strategy Officer of Ledn Mauricio Di Bartolomeo said the adoption of cryptocurrencies in Latin America meant that “people had to sell their bitcoins to spend in their daily lives.”
“That’s when we saw that credit could help people grow their businesses or projects without selling their crypto,” he said.
In other crypto payments news in Latin America, crypto exchange Huobi Global is working with AstroPay, an online payment solution, to bring fiat-to-crypto payment services to Latin America, PYMNTS wrote.
Read more: Huobi teams up with AstroPay for Fiat-Crypto payments in Latin America
The deal will allow Huobi Global users to access AstroPay’s payment platform to purchase crypto assets with fiat currency.
“Latin America boasts a young and dynamic population brimming with enthusiasm for the crypto industry, and we have seen a significant increase in the number of new Huobi Global users in this region,” said Lily Zhang, Chief Financial Officer. of Huobi Global, in a press release.
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