ccording to data from a November survey obtained by Finbold, 33% of Brazilian respondents plan to buy cryptocurrencies such as Bitcoin (BTC) within the next 12 months. Digital currency is the most valuable asset, followed by real estate (26%) and stocks (22%). Credit cards are also one of the top investment products, ranking fourth with a 21% share, while savings accounts rank fifth with a 15% share.
In terms of financial products in use in 2022, cryptocurrencies rank fourth with a 26% share. Checking accounts (73%), credit cards (72%), and savings accounts (55%) are the most common digital assets. The survey was conducted between October 1, 2021, and September 22, 2022, with 2,024 respondents ranging in age from 18 to 64.
Brazil's Crypto Adoption Drivers
Brazilians' desire to invest in cryptocurrencies can be attributed to factors such as the ongoing economic turmoil. Notably, Brazil has been hit with high inflation and currency depreciation as investors seek to protect their wealth and profit from the comparative advantage in a highly unstable economy, with digital currencies emerging as a hedge.
At the same time, a sizable portion of the population lives below the poverty line, despite having access to mobile banking platforms that facilitate access to digital assets. Indeed, smartphone penetration is regarded as a key driver of crypto adoption.
Overall, the rise of cryptocurrencies has resulted in greater financial inclusion for the general public, providing citizens with a more accessible way to save, spend, and protect the value of their money. It also meets the needs of fans who see various assets as a means of achieving financial independence.
In other news, as retail demand for cryptocurrency grows in Brazil, various innovations in the sector are providing residents with a more seamless banking experience. Users can now easily buy, hold, and sell assets thanks to the existence of neobanks. The country's young population, which prefers to invest in cryptocurrencies, is driving the sector to develop into an efficient and robust investment and payment option.
Furthermore, an influx of cryptocurrency entities is targeting the expanding Brazilian market. Several exchanges, including Binance, have previously stated that Brazil is a crucial organizational market with immense potential. Similarly, Coinbase intends to establish an engineering hub in Brazil.
Traditional financial products are dwarfed by cryptocurrency
The survey findings also point to the sector's potential, with digital assets ranking ahead of traditional products such as equities. As inflation and interest rate hikes continue, equities and cryptocurrencies have corrected mainly in 2022. With supporters claiming that these will rally again, investors are attempting to profit from the bear market by accumulating various assets.
Interestingly, unlike stock products, which operate within a well-organized ecosystem, cryptocurrencies are largely unregulated. Traditional players have also begun to enter the market, with the Brazilian Stock Exchange launching exchange-traded funds (ETFs) connected to Bitcoin and Ethereum (ETH). Some ETFs have already emerged as the most lucrative investment product. The entry of traditional financial institutions into crypto is a way to improve the added value to users.
The governing factor
At the same time, the intention to purchase digital currency will be influenced by other factors, such as the regulatory landscape. Despite the growth of the crypto space, most investors have remained on the sidelines due to a lack of regulation, with the Terra (LUNA) ecosystem crash and the FTX crypto exchange collapse accounting for a portion of the market downturn in 2022.
The potential implementation of regulations has caused entities such as banks to scramble to attract cryptocurrency inventors. A previous Finbold report noted that Brazilian challenger bank Nubank managed to amass approximately one million users in less than a month after launching the service.
However, as things currently stand, Brazilian lawmakers are redrafting cryptocurrency regulations to implement rules in response to the country's rising popularity in digital assets. The country has tracked activity related to testing central bank digital currency (CBDC) as part of the government's involvement.
At the same time, the Brazilian Chamber of Deputies approved legislation to regulate the industry. The executive branch must now approve the new proposed rule to become law.
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