Financial news

Em Conversa looks to uncover the secrets in Latin America (LatAm) that have caused the fintech market to boom, from being worth less than $50million in 2016, to $2.1billion in 2022. 

In June 2023, R$14.8billion was transacted in cryptocurrency in Brazil. Stablecoin, Tether‘s USD₮ accounted for nearly 80 per cent of the total volume for the month. Further accentuating this, 252,000 transactions were executed with Tether’s stablecoin, averaging R$59,000 per transaction. To learn more about how Tether is helping the Brazilian crypto market, we sat down with Paolo Ardoino, Tether’s CTO:

Can you tell me more about the company and your role within it?

Tether is a stablecoin. It makes the crypto economy much more efficient by putting dollars on a blockchain. Tether tokens are currently being used to disrupt everything from the digital payment space to e-commerce purchases to facilitating transactions within decentralised finance.

They are also being used to facilitate cross-border trade and remittances to emerging markets. Tether provides a stable and efficient way of transmitting dollars. It is widely used by tens of thousands of traders daily across Asia, Latin America, and Europe simply because it makes trading and arbitrage, among other things, more efficient.

Tether is driven by an aim to revolutionise the global financial landscape. Our mission is to provide accessible, secure, and efficient financial, communication, and energy infrastructure. Today, Tether enables greater financial inclusion. It also enables communication resilience, fosters economic growth, and empowers individuals and businesses alike.

I assumed the role of CTO for Tether in 2017. I’m responsible for overseeing the development and dissemination of technology for external customers, vendors, and other clients to help improve and increase business.

As the CTO of Tether, my focus is on building sustainable and resilient infrastructure for the benefit of underserved communities. By leveraging blockchain and peer-to-peer technology, we are committed to bridging the gap between traditional financial systems and the potential of decentralised finance.

What are some stablecoin trends we’re seeing in Brazil?

Latin America is an exciting hub for the crypto world – it has active and vibrant communities.

Crypto is particularly popular here for achieving financial independence, especially in nations facing currency devaluation.

While more and more Brazilians are embracing crypto, stablecoins are stepping in as a reliable medium between traditional finance and the crypto realm. In the dynamic of emerging markets, stablecoins are rising as a go-to solution. It’s not so surprising, they offer a smooth way to send value across borders, making them quite attractive for remittances and cross-border transactions.

With their tie to major fiat currencies like the US Dollar, stablecoins offer a steady value in an economy that’s no stranger to inflation. This surge in stablecoin use reflects the increasing need for stability and user-friendly options within Brazil’s crypto scene. The dollar-backed stability offers a safe haven amidst market fluctuations, appealing to investors and traders alike.

That’s one of the reasons why Tether is the largest form of payment for some of the biggest merchants globally. It allows customers within the LatAm market to safely exchange their native currencies for a safe dollar-pegged currency without relying on cash, while also protecting customers from inflation.

What is Tether doing to improve the stablecoin and crypto sector in Brazil and LatAm?

Tether has emerged as a foundation for a new financial system amid high inflation and currency depreciation. In this region, USD₮, Tether’s crypto asset, takes centre stage for remittances. It offers a cost-effective solution to the growing market of cross-border transactions. Brazil stands out as a promising market due to its demand for financial freedom tools like USD₮.

Our company is dedicated to shaping a brighter tomorrow for the people of Latin America. USD₮ offers swifter transactions and reduced fees, standing out as a reliable payment method. This sets it apart from other stablecoins. Tether is unwavering in its commitment to broaden accessibility across various networks. Consequently, this makes it accessible to a growing number of individuals who utilise it for savings and trading purposes.

Day by day, we can see that stablecoins are facilitating cross-border transactions and remittances in emerging markets like Brazil. In June, the amount transacted in cryptocurrency was R$14.8 billion, equivalent to almost 80 per cent of the total for the month.

In all, 252,000 operations with the cryptocurrency transacted this amount, with an average value of R$59,000 per operation, making Tether the most-used stablecoin for remittances. It was only second to Bitcoin in terms of usage.

Thanks to the partnership between SmartPay and Tether, Brazilians and foreigners have access to the stablecoin at more than 24,000 ATMs across the country. They will also be able to pay bills and establishments that accept PIX with USDt.

How does the Brazilian crypto and stablecoin sector compare to that of the rest of the world?

There is definitely an emerging market of Brazilian residents who use USD₮ as a way to access the financial system simply and quickly. The Brazilian crypto and stablecoin sector is showing a unique blend of growth and potential within the global landscape. Brazil stands out due to its substantial population and economic significance.

Amid high inflation and a steady depreciation of the local currencies, the unique properties of stable 90 per cent of the cryptocurrency that comes into the LatAm region are sent from foreign countries. 22.6 per cent is sent in Tether, making it the most-used stablecoin for remittances. As a result, this has allowed it to become the basis for a new financial system paving the way for other cryptocurrencies to follow.

The country’s crypto community is vibrant and eager to embrace innovative financial solutions. The convenience of stablecoins for cross-border transactions and remittances holds immense appeal in a country with a significant diaspora. In Brazil, USD₮ for example is used as a way to avoid the 10-12 per cent fees that banks apply.

The use cases for Tether in the region continue beyond there, as has been the successful use of USD₮ in the peer-to-peer (P2P) trading markets. Additionally, an increasing number of people in Latin America are also beginning to accept Tether as a payment method for real-life services.

That’s why Brazil is such a promising market. Simply put, there is a clear demand for access to financial freedom tools like stablecoins.

What are some unique challenges associated with Brazil and LatAm in the stablecoin/crypto space?

The Brazilian crypto ecosystem continues to evolve and presents exciting challenges and opportunities that differ from other markets and countries. I think one of the challenges is navigating the complex regulatory landscape, as the industry is still developing.

The need for a regulatory framework is crucial when building trust and awareness among the population. Of course, in a country where millions of people do not have bank accounts, challenges are higher. The growing rate of adults with a bank account ( from 56 per cent to 84 per cent in the last decade), mainly driven by regulatory changes, is facing the downside of expanding access to banking.

According to a recent Central Bank report, on the country’s credit ecosystem, 84.7M are burdened by unpaid credit card debts and face difficulties in managing their finances. The difficulties and limitations imposed by inflation and a less-than-inclusive financial system have excluded many of Brazil’s citizens from being able to participate in the country’s growing economy.

Challenges persist in the country. The political and financial scenarios in the region have inspired users to find more stable and secure currencies to hold, leading many to Tether. Acting as a reliable option for remittances and removing the high fees, long wait times, and the insecurity of liquidating fiat associated with traditional financial institutions, crypto and stablecoin have become the safest route to achieve financial freedom.

Plans for the future

Tether will continue to lead in emerging markets, to offer a safe harbor for the unbanked and provide a stable and efficient way of transmitting dollars. It is very important to use, oversee and nurture the growth of projects. Especially ones in relation to financial freedom, stability, and freedom of communication.

We want to diversify by investing in assets such as energy infrastructure, for example. The rise of sustainable energy in Bitcoin mining has far-reaching implications for the entire industry and beyond. Embracing renewable energy sources allows Bitcoin mining to significantly reduce its carbon emissions and address the environmental concerns associated with its operations.

This pivotal trend positions cryptocurrencies as a responsible and sustainable asset class, challenging preconceived notions and opening doors for broader adoption.

Tether recently invested in Uruguay’s renewable energy infrastructure serving as a milestone in the pursuit of sustainable Bitcoin mining. By harnessing the power of wind and solar energy, Tether seeks to reduce the carbon footprint associated with Bitcoin mining. Simultaneously, it wants to actively contribute to Uruguay’s ambitious renewable energy goals.

Alongside Tether’s recent venture in Uruguay, the company has also contributed to the initial $250million funding round for Volcano Energy. Volcano Energy is a renewable mining installation situated in El Salvador. It aims to secure a total funding of $1billion to construct the world’s largest mining facility. Furthermore, it is driven by sustainable practices.

Final thoughts

Stablecoins are completely revolutionising financial systems in emerging countries. Tether has created a lifeboat for struggling communities. It affords them a secondary financial option without the added risk other cryptocurrencies have attached to them.

One of the reasons crypto has become such a huge success is the value that it provides to lower-income populations in the world. Furthermore, the ability to trade and exchange financial assets without the regulation or use of a bank account is a massive aid for people who don’t have access to bank accounts. This is why stablecoins are such a huge deal. Not only can people access this crypto, but they now have something that can go up against the value of the USD head-to-head. All without the backing or need of a central bank.