In Latin America and the Caribbean, financial institutions’ interest in blockchain technology is rising – and quickly. While many are still waiting to see how the technology evolves, others are diving in. For some, blockchain is a cost-cutter. For others, it has potential to fight fraud. Others are thinking bigger still.
Here are five blockchain use cases in Latin America and the Caribbean that have highly disruptive potential.
1. Eastern Caribbean Central Bank:
For small banks in small countries, dealing with the international financial system is exceedingly expensive. That’s because they have to deal with tough US regulations to stop money being laundered or going to terrorist activities. Bitt, a Barbados-based tech startup, sees an opportunity here: using blockchain to build a data warehouse that can slash the cost of compliance for the Caribbean’s banks.
“The reason that is really of primordial importance to them, is because that is almost a life-threatening potential mistake if they get it wrong. The regulators can, especially in the States, can impose very, very heavy sanctions to the extreme of threatening to withdraw a banking license,” explains Bitt CEO Rawdon Adams.
2. Santiago Exchange:
Short selling – betting that a stock will flop – has a bad reputation. But most industry experts will tell you that actually the practice helps liquidity, making it easier for everyone to buy and sell. The Santiago Exchange is ahead of most of its peers around the world by introducing blockchain technology to the process. The new platform cuts the corresponding paperwork from days to minutes – and makes the back office processes a bit sexier, quips CIO Andres Araya.
3. Brazilian Central Bank:
When one regulator needs to get information from another, they have a few options: pick up the phone, bang out an email, even an old fashioned letter would do the trick eventually. But blockchain offers several advantages: primarily speed and security. Brazil’s Central Bank has launched a pilot project dubbed Pier, through which the regulator can request details from its peers (see what we did there?).
“Blockchain can reduce networks costs, since you don’t need to have all data concentrated in one single place,” says CIO Marcelo Yared.
The Brazilian development bank grants billions of dollars worth of loans every year. Now, it hopes that blockchain can help it trace the impact of that development assistance. It’s developing a pilot project using its own cryptocurrency, the BNDESToken, to literally follow the money. BNDES hopes that the token will allow it – and every Brazilian – to see where the money it lends ends up, and how effective its financing is.
This Argentine fintech company is hoping to short-circuit traditional bank lending – something the founder describes as a “black box”. Ripio is in the early phases of testing out a blockchain-based peer-to-peer lending network, using smart contracts and backed by real-world guarantors.
The technology slashes the cost of lending to low-income borrowers, a business area which traditional banks often find uneconomic. If successful, it could prove the potential for blockchain smart contracts to dramatically increase financial inclusion in emerging markets, says founder Sebastian Serrano.
IN PICTURES: Borrowing vs deposit rates at LatAm banks
A 1-minute tour of the state of fintech regulation in Latin America
Should big tech be financially regulated?
SURVEY: What’s the biggest limitation of blockchain?
Think you know what’s what when it comes to the payments industry in Latin America? See if you can match the speaker with the quote
SURVEY: Will new, growing data privacy concerns impact open banking progress?
Should tech companies be regulated by financial authorities?
No: Any financial services they offer are minor ancilliary business
Maybe: If they seek a banking license
Yes: Any company offering credit or payments should be monitored by financial regulators