LatAm Dispatch: Inflation and Blockchain Projects in the Global South

A few years ago, something unexpected happened: central bank money printers went brrrr and global fiat currencies were devalued at the same time. In Latin America, as elsewhere, people found a store of value in cryptocurrencies.

But in the Great Crypto Winter that followed, Latin Americans did something different. They held. In Chainalysis’ index of countries with the greatest grassroots adoption, Brazil, Mexico, Argentina, and Colombia rank in the top-20 globally. 

Why is that? To use a term of art: product-market fit.

In Latin America, there are many conditions at play: a canyon-sized gap in the quality of life between major cities and the countryside; neo-aristocracies leftover from the Colonial era that make upward mobility rare; runaway inflation that stretches one US dollar further than you’d imagine; informal economies that make it impossible for participants to access formal financial services; banking oligopolies; and a vanishingly small appetite for seed funding from blue-chip VCs.

This list makes it seem like Latin America is homogenous, when it is very much not. While some of these challenges cross borders, Latin America is a region of regions. And those regions have regions. The Web3 startups that have had the greatest impact are those that understand the particular community they’re serving. 

Here are some of the Latin America–based projects in the Polygon ecosystem that are building concrete solutions to long standing problems. 

Big shoutout to @marcusdotam, whose report, Last Mile DeFi: The Future of Finance in Latin America, informed and inspired what follows. 

Ripio Offers an Inflation Hedge in Argentina

According to the IMF, inflation in Argentina is 119%. This has, naturally, led to widespread adoption for digital assets, and crypto ownership in the country is twice the global average. Not surprisingly, much of that ownership is in stablecoins like USDC and Tether.

In June, Ripio helped launch LaChain, a Latin America–focused Layer 1, built using Polygon Supernets. This month, Ripio introduced UXD, a new dollar-pegged stablecoin, available to LaChain users in Argentina and Brazil. 

Over ten years, the Argentina-based startup has grown to 8 million users and $200M in monthly transaction volume. The value of homegrown Web3 projects is critical because of the unique jurisdictional challenges in Latin America. Case in point: When the local government of Buenos Aires announced that residents would be able to pay their taxes in Tether, Ripio was selected as one of the platforms to facilitate the payments. 

Ripio Portal, Ripio Wallet, and Ripio Trade, a fiat-to-crypto on-ramp, are joining the Polygon ecosystem, and will use the Polygon protocols to build a scalable B2B blockchain.   

Lemon Cash Is a Crypto Wallet With a Twist

The extreme inflation in Argentina has had a unique follow-on effect: The blue dollar, or dólar azul, is an informal currency exchange economy parallel to the official currency exchange economy.

To encourage use of the peso, access to dollars is restricted for Argentines. Which is why the going rate for blue dollars is often double the daily exchange rate on forex. These informal exchanges are called cuevas, or caves.

Growing a Web3 start-up within this regulatory framework would be difficult to near impossible for a foreign participant. 

Founded in Argentina, in 2019, Lemon Cash is a crypto wallet platform with 1.8 million users. In 2021, they partnered with Visa to offer Lemon Card, allowing users to pay in Argentine Pesos (or any other local currency) using their crypto assets, and receive up to 2% cashback in BTC. 

Now, Lemon Cash is working on bringing their platform on-chain by deploying it on Polygon Supernets. The app-chain scaling stack will provide Lemon Cash’s 1.8 million users access to the wider Polygon ecosystem.  

Lemon Cash users have already minted more than half a million NFTs on Polygon as part of the Lemon Nation project. 

Nubank’s 70 Million Brazilian Users Headed for Web3

"Brazilians hate banks." And with good reason. Before the launch of Nubank, Brazil’s banking incumbents extended credit at annual interest rates of around 200% to 400%. 

Whether Brazil is or isn’t part of Latin America is a debate that is as heated as what constitutes a Layer 2. Nonetheless, the region’s largest economy faces many of the same challenges, including unequal access to banking services. 

In ten years, Nubank has grown to become the second most valuable financial services company in Latin America. This year, Nubank launched Nucoin, a no-charge token that rewards user engagement. Nucoin is secured by Ethereum and built on Polygon Supernets. Airdrops of Nucoin began in March, available exclusively to Nubank’s 70 million customers in Brazil.

Brazil’s BTG Issues USD-backed Stablecoin

Late last year, Brazil’s congress passed a framework for the regulation of digital assets. Regulatory clarity opened the door for new kinds of participation: The first bank-issued USD-backed stablecoin. 

In April, BTG Pactual, one of Latin America’s largest investment banks, launched BTG Dol, and it was built on Polygon. Users can purchase it using BTG Pactual’s crypto platform, Mynt. 

Pinta: The Stablecoin You Didn’t Know You Needed

Crypto adoption like Argentina’s opens up new design space. 

Pinta Token is a 1:1 stablecoin good for one pint of beer at bars and restaurants throughout Argentina. There is something to be said for a UI so simple that you can use it while drinking.

Voting With Xcapit Wallet

Built as certified digital public good, Xcapit Wallet is open-source and self-custodial. With funding from UNICEF’s Venture Fund, the Argentina-based startup provides financial literacy and low-risk investment products. With Xcapit Wallet, users can also donate to local and global causes. 

In Latin America, cash is king. But earning an informal (i.e. cash) income is often a disqualifier for access to formal financial services. To that end, Xcapit has partnered with NaranjaX, Argentina’s second largest credit card issuer, in which users build credit by buying stablecoins. 

A Stablecoin for Remittances With Num Finance

As digital assets provide a store of value in countries with high inflation, Num Finance has taken a different route: stablecoins pegged to non-USD fiat currencies in Latin America. They have already launched stablecoins for the Argentine Peso and Peruvian Sol, with the Colombian Peso on deck. 

While a non-USD stablecoin seems contradictory, it has one very potent application: remittances. 

Anyone that has sent money abroad knows that it is this century’s stagecoach robbery. Remittances are the rare service that is both slow and expensive. While Latin America makes up 8% of the world’s population, it accounts for 20% of the global remittance volume. Mexico now receives more remittances than China, a country 10x its size.

A lot of the capital inefficiency is due to the outdated rails on which remittances are sent. Solving this inefficiency would change how money crosses borders in Latin America. 

Blu3 DAO at EthMexico

At EthMexico last year, Polygon Labs sponsored Blu3 DAO, a women-only hacker house that offered support and mentorship for 25 women attending the conference. Six teams from the Blu3 DAO house went on to become hackathon winners, and in the interim, Blu3 DAO grew their initiative into Africa, becoming Blu3 GLOBAL.

For more dispatches about Web3’s march to mass adoption, tune into the Polygon Labs Blog. Check out our social channels to keep up with updates about the Polygon ecosystem.

Together, we can build an equitable future for all through the mass adoption of Web3!

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