Saving (in) Latin America: Why stablecoins are thriving across emerging markets

Ecosystem Spotlight

ecosystem-guest-author-ripioSebastian Serrano is an Argentinian entrepreneur, investor and senior developer, Co-founder and CEO at Ripio. Starting as a skillful developer at an early age and then leading a successful IT startup, Sebastian built the first Bitcoin payment gateway in Latin America in 2013. A year later, he launched the digital platform Ripio, offering fiat-to-crypto brokerage plus lending solutions and a full suite of financial services for consumers. With Ripio, Sebastian and his team aim to widen access to the new digital economy in emerging markets.

In just a couple of years, stablecoins have changed the rules within the crypto ecosystem by offering the possibility to access the crypto economy with zero exposure to the widely-known volatility of the rest of the crypto assets, such as the overly-popular Bitcoin.

Most of these assets, such as USD Coin (USDC), set their value in relation to the US dollar, since it is the most widely used fiat currency in the traditional international market. Due to their digital nature and transactional simplicity, these assets have become an attractive alternative to make cross-border transactions and remittances across North American and European markets, but their increasing adoption as a store of value in emerging markets has set a whole different framework.


The allegory of the cave

For most people not living in South America this might sound strange, but the truth is that purchasing US dollars in countries like Argentina isn’t a matter of currency diversification but an act of need to prevent salary from slipping out of your hands.

Following the 2018 monetary crisis, the Argentinian peso collapsed by nearly 40% in 2019. In October 2019, a few weeks before the last Presidential election, the Central Bank limited Argentine citizens to buying a maximum of 200 USD per month to avoid massive reserve draining, which looks like an impossible task amidst high inflation rates and social turmoil. On top of that, the current government introduced a 30% tax on foreign currency purchases and, since last month, an additional 35% tax plus additional capital control measures. A black market based on street-based illegal exchanges known as “caves” (or “cuevas” in Spanish) -which are quite popular in these countries- has become a key player in this landscape. 

Due to mismanagement and many internal and external political factors, the country has defaulted on its external debt nine times before. Now history repeats itself, only this time the COVID-19 pandemic makes everything look more dreadful.

Meanwhile, the Brazilian real, which had been quite stable during last year, has fallen by 33% in 2020. Everything indicates that the entire region is on the verge of an economic collapse.

Enter the cryptodollar

In this complicated scenario, USDC appears as a way more attractive store of value for several reasons:

  • USDC has the same market value as the US dollar.
  • It does not have a maximum purchase limit (monthly dollar purchase limits do not have impact on crypto assets).
  • It’s a true safeguard to face the devaluation of local FIAT currency.
  • It's a new way to store value, without relying on traditional banking solutions.
  • You don’t need to have a bank account to buy, sell or transfer USDC.
  • It’s easier to store than cash.
  • It’s easily transferable anywhere you want.

In order to enhance our users’ experience with these crypto assets, we decided to build a full suite of USDC-based solutions at Ripio. The first one was to add user-friendly FIAT on/off ramps for USDC in our mobile wallet and exchange platform, where the demand for stablecoins grew by 9x during last quarter, compared to the first quarter of the year. In a matter of months, stablecoins earned the 2nd place at Ripio’s transactional ranking, a position historically held by Ether (ETH).

The second solution was to build a USDC yield-generating product for Argentine and Brazilian users. We called it Ripio Earn.

Ripio Earn works exclusively on USDC and has a minimum placement amount of 50 USDC, aiming to extend the solution to a wider segment of the population, not just avid investors. The initial interest rate for Ripio’s yield-generating product is 6% annually, a highly competitive number within the local market and even in some foreign markets, with optional monthly renewals.

Next steps include the implementation of Circle's transactional services, business accounts, and platform APIs to boost USDC-based operations across Ripio’s products. 

For more information on USDC and the potential of stablecoins in emerging markets, visit Ripio Launchpad (available in Spanish  and Portuguese).

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