Introduction

This briefing note offers insights as to whether cryptocurrency is an active form of currency transaction for family remittances to Latin America and the Caribbean. The main findings are:

• In the US-LAC outbound money transfer corridor, there may be 2.4 million potential Latino migrant cryptocurrency users, with a total stock to transfer US$740 million annually.
• The Latin American and Caribbean market points more uncertainty as to the volumes received:
  • There are an estimated 5 million retail users of crypto wallets in the region;
  • This amounts to an estimated stock of $2 billion among them;
  • There is no clarity whether these users have received or performed remittance related transactions.
• Across countries there are differences:
  • In 2023, Venezuela registered potentially 100,000 retail transactions supported by cryptocurrency;
  • El Salvador with Bitcoin as legal tender registered less than US$7 million monthly payments through Chivo wallet or 27,000 monthly transactions.
• Available crypto wallets in the US and LAC markets share similar characteristics regarding their functional use for remittance transfers. Their design is not yet in correspondence with the migrant market. No leading money transfer company handles or accepts cryptocurrency.
• Were Latino migrants with crypto wallets to transfer all their funds for family remittances, their market share participation would be 0.5% of the total market.

The role of cryptocurrency as a source for remittance payments has been highlighted by some as emerging, and others as a potential opportunity. The examples utilized in the news, such as references to Bitso, or use of cryptocurrency in Venezuela or Argentina typically involve general comments on uncertain volumes, or use of validated data. 

The evidence does not yet demonstrate an effective footprint. For the most part, analysis on cryptocurrencies is unclear as it relates to remittances, because most of the information is speculative and not supported by concrete evidence. Generally, analysts are making uninformed references without concrete illustrations beyond the “it is cheaper than the current market” statement.

More importantly, news reporting on cryptocurrency does not reflect clarity between the different segments or categories that apply to cryptocurrency. This briefing reviews Latin American countries that point to this still nascent issue as an environment that is not, yet remittance versed.

Cryptocurrency wallets in the market show the ability to perform crypto transactions into stable coin or US-dollar bank accounts, but their design and marketing does not correspond to the migrant-sending market.

Finally, while this financial vehicle may offer some opportunities, such as low or no cost, due to the very low digital finance capability on the receiving end, few significant locations that may accept crypto transactions or wallet versatility to perform payments at local stores in local currency, create challenges that may become greater than the opportunity.

An Overview of Cryptocurrency

A nascent but growing industry[1], crypto assets can generally be divided into three main subsegments: exchange, payments, and custody. Exchange refers to activities relating to the trade, swap, or brokering of crypto assets; payments refer to the use of crypto assets to complete financial transfers, top-ups, or purchases; while custody refers to security, escrow, or wallet services. Exchange activities constitute the largest segment in LAC, roughly equaling the share of payments and custody segments combined[2].

To offer an analytical perspective about the cryptocurrency market, the starting point consists of determining the appropriate indicator to use as it relates to those three categories of cryptocurrency vis a vis remittance: volume (stock of value, estimated at US$2.3 trillion), annual volume in transaction exchanges (US$80 billion), or users (575 million). The second (exchanges) or the third (users) would be appropriate baseline indicators because they enable the activity for remittance transfers. 

Key facts in assessing the market:

It is important to keep in mind the distinction between market cap (the total stock of cryptocurrencies), cryptocurrency exchanges, users, and the cryptocurrency storing and transfer or exchange vehicles: crypto wallets.

• Global market cap in US$ values of cryptocurrency as of 2024 is US$2.3 trillion—global economic activity is US$108 trillion in 2023.
• Average daily cryptocurrency exchange ranges from US$70 to US$80 billion (3.5% of market cap), pointing to a dynamic and volatile market with fluctuations of more than 5% a day (note, daily global remittance fund transfers are US$3 billion);
• The number of owners of crypto assets is estimated at 575 million physical and institutional entities.
• The number of owners of crypto wallets is 122 million among Bitcoin and Ethereum (71% of all volume). Crypto wallets are the fundamental payment-based vehicle for cryptocurrency transactions for exchange, payment, or custody. Further, this 35% of all value lives in ‘hot wallets’ as opposed to ‘cold’ wallets, the latter of which are not accessed regularly and stay offline.
• Only 10% of these crypto wallet owners are active weekly.
• The number of global retails[3] crypto wallet owners is 117 million (96% of all owners, but 6% of all cryptocurrency value);
• The average value among retail crypto wallet owners US$307;
• Crypto wallet owners in the US are estimated at 22% or 26 million of global users;
• Total estimated value of retail crypto wallet owners is $36 billion, and $8 billion in the US.
• The demographic profile of cryptocurrency users in the US is very different from the average migrant profile:
  • crypto users are younger, 70% are under 40, whereas 60% of migrants are over 40.
  • half of which would be foreign-born Latino migrants (2.9 million).
• At US$307 average stored in crypto wallets, Latino foreign-born wallet stored value in the US would be US$800 million.
• Any remittance transaction would originate from this market segment apart from someone who randomly chose to try using a crypto wallet.
• Typically, 80% of adult migrants send money, which would translate into 2.4 million Latino crypto users who, were they to use their wallets to remit all their funds, would rely on an annual volume of US$740 million (US$2 million a day).
• Currently, the US-LAC number of senders is close to 30 million for an estimated US$300 million transfers a day. An Inter-American Dialogue 2021 survey of Salvadorans thinking of using cryptocurrency pointed to 3%. Yet the actual number is under 1%.

The figures above offer a baseline to understand the extent to which crypto wallet users would or could perform remittance-related transactions in the US, that is, sending crypto currency to relatives in crypto or fiat.

The baseline matters because it offers a method that can be benchmarked to better understand cryptocurrency performance on remittances to Latin America and the Caribbean.

Cryptocurrency in Latin America and the Caribbean and Remittance Transfers

According to Chainalysis[4], 7% of crypto value transactions are in the Latin American and Caribbean region, estimated at US$370 billion between July 2022 and June 2023, resulting in US$1 billion exchanges a day.

Less than 5% of these assets are retail transactions under US$10,000, or an annual average of US$2 billion, which would represent less than 5 million retail users across the region. Retail crypto users may be exchanging US$5 million a day at most—compared to US$400 million a day in remittance transfers. 

In addition, more than half of these transactions are performed in stablecoin. Argentina, Brazil, Mexico, and Venezuela captured 75% of these transactions.

It is uncertain what percent of these transactions and users originated or interacted from a transaction that was a family remittance or what percent of these users receives remittances. However, the figure alone offers an idea of the scope and depth of the market compared to 50 million remittance recipients.

Moreover, the information available regarding crypto transfers as remitting is largely anecdotal and unsupported by evidence.

In the following section, we review El Salvador, Venezuela, and Mexico as cases where the media has associated remittances with cryptocurrencies. 

The section also shows a review of popular cryptocurrency wallets and their remittance functionality.

Chivo Wallet in El Salvador: Highly Underperforming

In 2021, El Salvador’s government introduced Bitcoin, including a subsidy to motivate users to adopt Chivo Wallet, and issued a cryptocurrency wallet. Overall, we find that senders still prefer the existing money transfer operators to send money.

In an Inter-American Dialogue survey to Salvadorans in the US in September 2021, 61% of survey respondents were aware of Bitcoin, but only 20% had used it. Further, 7% had tried sending remittances in Bitcoin, but the experience was negative for 100% of the respondents; only 4% of the sample were aware of a company that offers remittances using Bitcoin. More importantly, 13% of Salvadorans would like to have a different option to send remittances, preferably a direct deposit, and less than 3% considered Bitcoin as an option.

These responses coincide with Central bank data from El Salvador, including the use of the crypto wallet, Chivo Wallet, and still shows slow use of Bitcoin and Chivo Wallet for money transfers. In Q4 of 2021, when the currency and wallet went into effect, El Salvador received US$57 million in Chivo wallet transactions (not all of which were Bitcoin-based), and since then, volumes have lowered by half. As of April 2024, the accumulated volume transferred via the digital wallet was US$28.8 million or US$7 million a month, equal to 27,000 transactions a month (out of 2.2 million monthly transfers). 

TABLE 1: Remittances to El Salvador (volume for January-April)

Source: Central Bank of El Salvador

Venezuela and Crypto: A Half and Half Story

The conversation around using cryptocurrency in Venezuela to remit reflects anecdotal references of digital nomads temporarily transacting with crypto, or average Venezuelans receiving funds via crypto wallets. The topic has gained notoriety as Venezuela’s political crisis explodes into a major currency devaluation, resulting from Maduro’s economic mismanagement that led to a dramatic slide of the national currency.

To note, access to data on transfers of remittances to Venezuela is scant. 

The Inter-American Dialogue’s, however, demonstrated that less than half of Venezuelans remitted to families since 2019, and the large majority used informal mechanisms, such as sending through travelers or bartering dollars for local currency in third party bank accounts. Little evidence has existed on actual transfers, and money transfer companies try not to operate in the country, due to sanctions related risks or currency instability. 

Chainalysis showed that during the year period studied (July 2022-June 2023), crypto transactions in Venezuela amounted to US$25 billion, which, if broken down during the two years, was 20% of the country’s GDP in 2022. The report quoted political activists who said that the platform was used as a way to support humanitarian relief to many people in 2019. AirTM did provide support to over 60,000 owners of e-wallets for a total of US$5 per person, though a handful got to use the currency. Moreover, according to Ecoanalitica, 1.2% of payments in Venezuela are performed via cryptocurrency, meaning that the volume exchanged or transferred, as reported by Chainalysis, was rather institutional than retail in nature.

In 2024, several retail chains in Venezuela that accepted cryptocurrency in prior years now no longer accept it. In addition, Bloomberg reported that Chainalysis estimated that 9% (US$461 million) of t Dialogue’s calculated remittance volume in 2023 were cryptocurrency transfers—or equivalent to 2% of the volume or 125,000 transactions. It is hard to ascertain the extent of that volume, but Chainalysis calculated the figure by looking at retail wallet owners performing less than US$1,000 transactions. 

Notably, the use of cryptocurrency has been a questionable issue when it comes to the Maduro government. Maduro created the Petro, a cryptocurrency backed by oil and gold reserves, in 2017, but it was discontinued years later. In 2023, because of a corruption case of siphoning between 3 and 20 billion dollars through cryptocurrency, led by Superintendencia Nacional de Criptoactivos (SUNACRIP), the agency in charge of overseeing cryptocurrency went under criminal investigation. The allegation is that pro-Maduro loyalists, like Tareck El Aissami, who was in charge of Petróleos de Venezuela, S.A. (PDVSA), were allegedly using cryptos like USDt to carry out oil sales around the world.

In conclusion, the use of cryptocurrency in Venezuela is a reality more evident than elsewhere in the region and a popularly known payment system between institutional and retail players.

Mexico and Cuba are other cases where references are made to the penetration of cryptocurrencies for remittance transfers. In the case of Mexico, Bitso executives mentioned in an interview that they had performed US$4.3 billion transactions in remittances in 2023 as part of their back processing support to fintech like PayBrokers, Félix Pago and Briq.mx. Bitso Business basically provides their blockchain technology to process payments for these businesses.

The Cryptocurrency Intermediation Market

For remitters to send and have relatives receive cryptocurrency, most of which is in the form of stablecoin, access to cryptocurrency transfers or a cryptocurrency wallet is the first step. The market for wallets runs in the thousands and is very widespread. 

For this briefing, the Dialogue reviewed more than 10 crypto wallets were reviewed in terms of their registration process, purpose, functionality, fee structure, and other features—like currency exchange information.

The main finding is that there are two sets of companies, those offering the almost exclusive purpose of operating cryptocurrencies for mostly exchange and custody services. And those that offer versatile payment mechanisms from of a larger pool of FinTech.

TABLE 2: Crypto Wallets: Purpose and Functionality

Source: Author’s elaboration

The table above offered some basics about the various wallets available.

The main advantage for migrants of these types of cryptocurrency wallets is that pricing is typically zero. The drawback is substantive:

• Most wallets operate in a limited financial transaction environment disconnected from payment networks through retailers.
• Digital financial access among the average person, even remittance recipient is very low: for Central Americans between 10 to 3% of adults own a digital wallet—those receiving remittances for more than five years are more likely to use it. Mexico and Colombia the percentage is between 30 and 40% respectively.
• Money laundering compliance becomes an issue for cryptocurrency transactions, and the mix may increase risk assessments among banking institutions.
• Migrants lack sufficient disposable income to consider crypto as an investment and may find it complicated to navigate and obtain more than one currency to conduct payments.
• The target population in the cryptocurrency business typically is marketing to male, professional, and high-income individuals, which contrasts with the migrant profile. The features and design architecture of the wallets, with few exceptions, like OSMO or Blaze, are not fully ‘tropicalized’ to a migrant’s interest and needs.
• Remittance companies’ reluctance to integrate cryptocurrency deters consumers from learning how to navigate this environment.
• The availability of cryptocurrency exchanges and services, such as ATMS, may be limited for migrants in terms of access and financial feasibility.

Key Takeaways

When it comes to the extent to which crypto currency or crypto wallets are used for family remittances, the evidence does not yet demonstrate an effective footprint. For the most part, reports on cryptocurrencies are unclear as it relates to remittances, because most of the information is speculative and not supported by concrete evidence.

More importantly, the baseline for payments in cryptocurrency from the US-LAC corridor seems to be at most US$700 million. In the Latin American remittance context, it would mean 0.6% market share.

Cryptocurrency wallets in the market show the capacity to perform crypto transactions into stable coin or US-dollar bank accounts, and were their design and marketing better correspond to the migrant-sending market, users would entertain accessing them.

Key Terms

Cryptocurrency

• Cryptoasset
• Mining
• Blockchain
• Stablecoins
• Centralized finance (CeFi)
• Decentralized finance (DeFi)
• CBDCs – Central Bank Digital Currency
• P2P
• Total value locked (TVL)
• Smart contracts
• AML/CFT
• KYC regulations

[1] https://www.statista.com/outlook/fmo/digital-assets/cryptocurrencies/worldwide?currency=usd

[2] https://www.jbs.cam.ac.uk/faculty-research/centres/alternative-finance/publications/crypotasset-ecosystem-in-latin-america-and-the-caribbean/

[3] Retail owners are categorized as those with stocks and transactions under US$10,000. Average value for those users who owns wallets since 2020 is $400 and for those before 2020 is $200, with an average of US$307. Other owners are institutional or legally established entities like businesses.

[4] CHAINALYSIS. Latin America: Venezuela and Argentina Stand Out as Examples of Crypto’s Unique Utility. OCTOBER 11, 2023.