The political turmoil and rising inflation in Peru since last year have led many people to adopt crypto assets as a store of value.
In the assessment of Alvaro Castro Lora, a lawyer specializing in crypto assets regulation and founder of the Blockchain Association of Peru, the country’s economic situation, the devaluation of the local currency (Peruvian sol), and government instability are the elements that are leading to the growing interest in crypto.
“Some have started investing in crypto assets precisely because its decentralization is a force against state intervention”, he told CoinDesk.
The population uses crypto as a store of value
Pedro Castillo, the current president of Peru, took office a year ago and has already suffered two impeachment attempts. In addition, he was expelled from his party, Peru Libre, in July and is currently facing investigations for alleged corruption.
Since he has taken office, Castillo has made 50 cabinet changes, with his prime minister resigning in early August.
According to Lora, when Castillo took office, Peruvians feared that the new government would impose currency restrictions, and capital controls, or cause currency devaluation.
This fear led the wealthiest people to withdraw their money from their country. “But people who can’t, who don’t have enough savings, have started to look at crypto assets as an alternative store of value”, he said.
In fact, Buda.com, a Chilean-based crypto asset exchange with operations in Peru since 2017 and more than 500 thousand local users, has registered an “exponential growth” of crypto assets adoption by 2021. The annual trading volume went from US$19,500 in 2020 to more than US$74 million in 2021, reaching US$22 million in volume by the end of August this year.
Stablecoins on the rise
In addition to Buda.com, Argentine platforms Buenbit and Let’s Bit also started operations in Peru in 2021, while Spain’s Bit2Me entered the country with the acquisition of the local exchange Fluyez in July this year.
Buenbit, with more than 700 thousand users, has seen strong adoption of stablecoins – about 90% of fiat currency trading volume on the platform is exchanged for stablecoins. In addition, the company was the first exchange to add a stablecoin pegged to the Peruvian sol, called nuPen, and developed in partnership with Num Finance, a crypto assets company that also created nuARS, a stablecoin pegged to the Argentine peso, which runs on Binance’s blockchain.
The use of USD-linked stablecoins in Peru has also grown in the past year. By August 2022, Buddha.com recorded US$1.4 million in USDC transactions. In 2021, the total volume was US$ 945 thousand.