Deep dive: Argentina and Brazil blockchain landscapes

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Latin America is fast becoming a hub for tech experimentation and adoption. Fueled by a heightened need for secure, transparent, and efficient systems, the region is proving fertile ground for blockchain technology to prove its worth. Two of LatAm’s top economies, in particular, are demonstrating a willingness to embrace blockchain technology, whether in stablecoins, central bank digital currency (CBDC), digital ID, or supply chain solutions.

Brazil and Argentina—first and third in the region by gross domestic product (GDP), respectively—are leading the charge in blockchain adoption, propelled by political and economic turmoil, inflation, and the need for increased financial inclusion.

A seeming perma-crisis in Argentina has seen it grappling with one of the highest inflation rates in the world, inspiring a surge in stablecoin usage as citizens seek a more reliable option than their fiat currency.

In contrast, Brazil’s GDP has remained in the top ten globally for the past decade, growing eight percent over that time, yet it has lived through equally substantial political upheaval and scandal during that period, hampering its efforts to keep pace with other leading “developing economies,” such as India and China. Being open to the possibilities of innovative blockchain technologies, such as a ‘digital real,’ could well give it a boost in this race to remain a global economic powerhouse.

This makes the LatAm odd couple a potentially interesting comparison. Both embrace blockchain but from somewhat different directions, whether that be necessity or competitive advantage.

As new regulations and policies take shape—and with Argentina’s pro-digital asset administration just passing the one-year-in-office landmark—understanding the evolving landscape of digital assets in these two nations is crucial, particularly for those looking to set up shop or invest in these key LatAm markets.

Setting the scene

Dollarization, hyperinflation, and stablecoins

Argentina has been plagued, on and off, by persistent inflation since the 1970s. Its most severe episodes of hyperinflation occurred in 1989-1990 when annual inflation exceeded 3,000%. In response, the country implemented the ‘Convertibility Plan’ in 1991, which pegged the Argentine peso to the U.S. dollar at a fixed 1:1 rate to restore economic stability.

While this plan initially helped tame inflation, it ultimately became unsustainable as Argentina entered a deep recession in 1998. The inability to adjust monetary or exchange rate policy led to a worse financial crisis, culminating in January 2002, when the government abandoned the peg. This devaluation helped restore economic flexibility but also wiped out savings and precipitated a banking crisis.

Compare this situation to neighboring Brazil, who also pegged its currency, the Brazilian Real (BRL), to the U.S. dollar in 1994 under the ‘Plano Real,’ but used a crawling peg system—a type of flexible exchange rate system whereby the value of a currency is adjusted gradually over time in response to changes in economic conditions—allowing for more gradual adjustments. When economic pressures grew in the late 90s, Brazil abandoned the peg in January 1999, allowing the Real to float, leading to depreciation but also aiding economic recovery.

In other words, Brazil’s was a less strict peg to the dollar and a far gentler exit from the peg than Argentina’s.

Enter the new innovation of stablecoins: digital assets whose value is pegged to that of another currency, commodity, or financial instrument, often the USD (as is the case for the world’s widest circulated stablecoins, Tether and USDC).

From the perspective of an Argentine citizen stressing about the ever-dropping value of their savings, this digitally stable alternative offered a lifeline. As explained by the Michigan Journal of Economics: “Since stablecoins are relatively easy to transact and are pegged to the value of another currency, they are seen by an increasing number of Argentinians as providing a more stable and reliable alternative to the Argentine Peso.”

You may be thinking, “Hold on, didn’t Argentina try and solve its problems by pegging its fiat currency to the dollar, with disastrous results? Isn’t turning to another dollar-pegged option a recipe for similar tragedy?”

There is a difference, however. Unlike a government-imposed currency peg, which affects the entire economy, stablecoins allow individuals to voluntarily store value in dollars while still using local currency for transactions. This provides a hedge against inflation without the risks associated with a rigid national monetary policy.

According to blockchain analysis firm Chainalysis, despite levels of inflation having dropped since the election of President Javier Milei in late 2023, Argentinians continue to purchase stablecoins at a higher rate than other LatAm markets.

Until last spring, the country lacked a legal framework to account for this ever-more popular asset type, not requiring registration or enforcing securities laws on digital asset issuers, exchanges and providers.

This changed with the passage of ‘Law N°27,739‘ in March 2023, which introduced substantial reforms to Argentina’s regulatory framework.

Argentina’s regulatory requirements

The law created a new category of virtual asset service providers (VASPs), which were henceforth mandated to monitor and report anti-money laundering (AML) and counter-terrorist financing (CTF) activities. It also appointed the Comisión Nacional de Valores (CNV)—the top Argentine securities watchdog—as the regulatory authority for the digital asset industry, with the task of establishing a comprehensive regulatory framework.

Shortly afterward, on March 22, the CNV issued General Resolution N°994, which introduced, amongst other measures, a definition of VASPs and a mandatory registration requirement.

The resolution broadly defined VASPs as individuals or entities that exchange between virtual assets and fiat currencies or other virtual assets; transfer virtual assets; provide custody or administration of virtual assets; and/or offer financial services related to the offering or sale of virtual assets.

Such entities must register with the CNV if they conduct operations using any “.ar” domain, have commercial agreements that allow for the local receipt of funds or assets from Argentine residents, advertise to Argentine residents, and/or generate more than 20% of total turnover in Argentina.

Once a license is obtained, VASPs are subject to a number of obligations, such as AML/CTF and Know Your Customer (KYC) procedures, transaction monitoring, and implementing risk management frameworks to prevent financial crimes.

VASPs are also subject to relatively stringent reporting obligations. For example, VASPs must report monthly all client account openings and closures, any transactions involving virtual assets equal to or exceeding six times the minimum wage, or any transaction over $1,350.

Additionally—and potentially troubling for the more privacy-obsessed in the digital asset space—VASPs are required to submit detailed personal information of account holders to ensure transparency and traceability in transactions.

Despite some of these measures seeming onerous, the new controls are largely aimed at AML/CFT and financial crime and provide a greater level of regulatory clarity for the industry. This is a safe assumption based on the fact that stifling innovation would clearly not be in keeping with the pro-digital asset platform of President Milei.

Milei’s pro-blockchain stance—for better and worse

Before being elected, Milei told local news network Clarin in January 2023, “What Bitcoin represents is the return of money to its original creator—the private sector.” He added, “Bitcoin is the natural reaction against the central bank scammers and to make money private again.”

This, in microcosm, typified the now-president’s broader approach to finance and the economy.

When he took office in December 2023, Milei inherited a difficult legacy from the previous Peronist government, with hyperinflation of 211%, a GDP recession of -1.6%, and a high poverty rate of 45%. Drastic measures were deemed necessary to treat this calamity, and the self-declared libertarian “anarcho-capitalist” vowed to “blow up” the central bank, take an axe to the bloated government, and lower inflation.

Naturally, the latter was the first priority, which was partially achieved as inflation slowed from a monthly rate of 25.5% in December 2023 to just 2.7% in October 2024—its lowest level in three years.

Next on the list were slashing government spending, tackling the Central Bank, and embracing the free market. Thus, in line with Milei’s decidedly private-sector-above-all economic philosophy, he embraced a sector that—for some time—had been providing a crutch to so many Argentinian citizens: the blockchain space.

Argentina now ranks among the top nations globally for digital asset use, and its low energy costs support a thriving BTC mining industry. Last June, the president reaffirmed his support for the sector, saying on X that “there will be free currency competition, so if you want to use Bitcoin, there won’t be any problems… and you’ll also be able to use other units like WTI, BTU, and whatever else is most appropriate for your business.”

Milei’s hope is that higher adoption rates will bring power back to the private sector and enhance financial inclusion, while at the same time reducing the influence of the Central Bank.

However, more recently, the president made the news in a less productive manner—for Argentina’s economic recovery and for the blockchain industry in the country—when he endorsed a little-known digital currency called $LIBRA.

$LIBRA scandal

On February 14, Milei posted on X that the $LIBRA project was “dedicated to boosting the growth of the Argentinian economy by funding small businesses and entrepreneurs.” His post linked to a website where the digital coin could be bought, the domain name of which included Milei’s popular catchphrase “long live freedom.”

Unfortunately—for those engaged in the project of legitimizing the blockchain space and getting it into the mainstream of Argentine politics and society—$LIBRA is considered a “memecoin” due to it being, like other memecoins, a digital asset founded on social media hype and community-driven speculation, rather than value or utility.

Memecoins are often associated with crypto scams, such as pump-and-dump “rug pulls,” whereby the creators or principle investors in a new coin/token ‘pump’ the price by heavily advertising it and buying large amounts of the token themselves, usually through multiple anonymized accounts so that it looks popular, and then as soon as the price/value rises to a certain amount, suddenly ‘dumping’ (selling) their holdings all at once at a massive profit.

Milei deleted his post hours later, saying he was “not aware of the details of the project,” but his contribution was enough to briefly value the token at more than $4 billion before its price crashed.

The scandal had a severe political backlash, with the federal prosecutor’s office reportedly examining whether the president engaged in fraud and Argentina’s fintech chamber suggesting that the case could amount to a rug pull. 

It remains to be seen what the ultimate consequences may be for Milei, but the scandal was at least an unwelcome reminder of what the darker side of the digital asset space represents—an image that still looms large in the popular imagination when ‘crypto’ is discussed.

This tumultuous economic landscape positions Argentina as very much the noisy neighbor, economically, in contrast to its relatively stable LatAm cousin to the east, Brazil. However, while Brazil may not have suffered the same debilitating lows of Argentina, it has had its fair share of political scandals to navigate.

Economic overview of Brazil – riding the scandals

In August 2016, former President Dilma Rousseff was impeached and convicted for breaking Brazil’s budget laws. Only two short years later, her predecessor and the current President of Brazil, Luiz Inácio Lula da Silva (Lula), was sentenced to twelve years in prison for corruption and accepting bribes during his first term of office between 2003 and 2011. He eventually served only 580 days, after which he ran for office again and won his second term as President in October 2022.

Add to these political scandals the presidency of the polarizing and controversial populist Jair Bolsonaro (in office 2019-2023) along with the globally devastating COVID-19 pandemic of 2020-2021, and it’s clear the past decade or so hasn’t been smooth sailing for Brazil either.

Despite this, the country’s steady real GDP growth (%)—which shows how much a country’s economy (total goods and services) grew, adjusted for inflation—has only taken temporary and short-term dips below zero since 2014, when it was 0.5%, and now sits at a respectable 2.9% (higher than the United States, Japan, South Korea, and the United Kingdom).

When compared to Argentina, who’s real GPD is currently -1.61%, Brazil’s relative success can be in part attributed to it being a larger, more resource rich country, with a population more than four times that of Argentina (211 million vs. 45 million). All of which has helped it navigate the kind of scandals and crises that brought Argentina to its knees.

But, as we’ve seen in the two countries’ comparative approaches to dollarization and de-dollarization, Brazil also deserves some credit for making smart decisions when the time was right. Another example of this is the country’s early—or earlier—announcement of a digital asset regulatory framework.

Brazil’s framework to be

The new law also defined VASPs as legal entities that exchange virtual assets to or from fiat currencies, exchange virtual assets to or from other virtual assets, transfer virtual assets between wallets or entities, perform custody and administration tasks, and/or participate in financial services related to the offer or sale of virtual assets.

As a side note, the law also stated that “assets representing securities” would fall under the jurisdiction of the Brazilian Securities Commission (CVM), which published guidance on what would be considered a public offering and started a Regulatory Sandbox initiative to assist companies with issuing and trading digital securities tokens.

In early 2024, the BCB began consulting with stakeholders on a regulatory regime for digital assets. In terms of what this may look like, a 2024 statement from the BCB suggested that its regulatory approach would be focused on consumer protections and securing the stability of the financial system.

“The regulation aims to establish minimum requirements for virtual asset service providers to conduct their operations, while also committing to implementing appropriate practices when interacting with their clients,” stated Nagel Lisanias Paulino, of the Financial System Regulation Department at the BCB.

The framework has yet to be announced, but it is expected to extend existing AML/CTF and KYC rules to licensed digital asset companies. There is no suggestion that the impending framework will introduce any excessive obligations on digital asset firms beyond what current BCB-licensed entities must comply with, and thus, Brazil remains an attractive market for such companies.

This was on display in January of this year when the world’s largest digital asset exchange, Binance, became the first exchange to receive approval from the BCB for a broker license in Brazil.

CBDCs and the role of central bank

In August 2020, under former President Jair Bolsonaro, the BCB initiated studies on issuing a digital version of the Brazilian Real, later named ‘Drex,’ initially to be a wholesale CBDC for use in inter-bank payments.

After initial discussions, general guidelines for the CBDC were released in May 2021, and a sandbox program aimed at developing use cases for the Drex was launched by the Financial and Technological Innovations Laboratory (Laboratório de Inovações Financeiras Tecnológicas, “LIFT”).

In February 2023, the BCB revised the guidelines of Drex, as well as setting the directives of its pilot project, the “Piloto Drex.” The first sixteen participants were onboarded in July 2023.

According to local news site Revista Forum, as of January 3 this year, “at least three transactions have been made with the virtual currency, the ‘digital real,’ within its pilot project.”

The role of the Central Bank and a CBDC represents the most striking divergence between the comparative approached of the Argentine and Brazilian governments. While Milei wages war on Argentina’s Central Bank, Lula has continued the work of his bitter rival, Bolsonaro, in supporting the BCB’s efforts to modernize the financial system through digital currency initiatives.

However, when looking at the regulatory approaches, Brazil’s digital asset law may have come sooner and Argentina’s may be—currently—more complete, but they contain several similarities, particularly in terms of license requirements, definitions of VASPs, and the clarification of the relevant regulatory authority.

More similarities between the two countries can be found when looking at local public-private sector initiatives involving blockchain technology. A number of projects in both Brazil and Argentina are exploring how blockchain technology and digital assets can inject increased transparency, efficiency and trust into key systems.

Blockchain integration – use cases

Digital identity

First up is the area of digital identity (ID) and giving citizens back control of their personal data.

In October 2024, the government of Buenos Aires launched QuarkID, a blockchain-based digital ID system for its 3.6 million citizens. The system aimed to give them more control over their personal data while improving privacy and security.

QuarkID is integrated with the city’s widely used miBA mobile app, offering decentralized digital identities (DIDs) to residents. Through QuarkID, individuals can access, store, and share their verified credentials, such as birth certificates or tax documents, securely and independently, giving people, in the words of QuirkID, “control over their information, with a security anchor through blockchain.”

The system utilizes zero-knowledge proof (ZKP)—a cryptographic method used to prove knowledge about a piece of data without having to reveal the data itself—via the ZKsync-powered Era layer 2 blockchain.

“The incorporation of zero-knowledge blockchain technology into the City’s digital identity system is an unprecedented milestone that positions us globally and once again demonstrates that the City of Buenos Aires is at the forefront of innovation,” said Jorge Macri, Chief of the Government of Buenos Aires, in a press release, as reported by GlobeNewswire.

He added that “adopting new technologies that simplify citizens’ processes and grant them full control over their information is a fundamental step to continue offering more secure and transparent digital solutions.”

This sentiment was echoed by co-creator of Quirk ID, Diego Fernández, who is also former Secretary of Innovation and Digital Transformation for the Buenos Aires City Government. He said of the project: “By giving residents control over their identities, we’re not only improving privacy and security, but we’re also setting the foundation for a future where personal data ownership is a basic right, protected by advanced zero-knowledge-based cryptographic proofs.”

The prospect of applying blockchain technology’s inherent benefits to the area of identity is not new, and it’s one that the government of Brazil has also been exploring on a somewhat larger scale.

In September 2023, the government of Brazil revealed plans to implement blockchain technology for its digital ID system for over 214 million citizens, utilizing a private blockchain system developed by the Federal Data Processing Service (Serpro).

The initiative began with the rollout of an upgraded national ID card in 2022, known as the Carteira de Identidade Nacional (CIN). To further secure and modernize this system, the Brazilian Federal Revenue Service (RFB) collaborated with Serpro to develop a blockchain-based data-sharing platform named b-Cadastros, which underpins the digital issuance of CINs.

The initiative began in the states of Rio de Janeiro, Goiás, and Paraná, but a February 2022 decree stated that all issuing agencies were required to adopt the new standards of the CIN by November 6, 2023.

According to Serpro’s president, Alexandre Amorim: “Blockchain technology plays a key role in protecting personal data and preventing fraud, providing a safer digital experience for Brazilian citizens. The use of the b-Cadastros blockchain platform is a great differentiator for the security and reliability of the National Identity Card project.”

He added that “applications that use blockchain can count on advantages such as the immutability of data since it is practically impossible to alter or falsify the data recorded in a blockchain network.” 

The system’s creators hope that adding blockchain’s immutability and decentralization to ID can reduce fraud, enhance intergovernmental collaboration, streamline administrative processes, and bolster data security across the nation.

For Brazil, the national ID system represents a significant embracing of blockchain technology’s potential, and when considered alongside the more recent Buenos Aires initiative reflects a shared desire between the two countries to leverage blockchain.

Private sector – supply chain traceability and agriculture

Moving to the private sector, an increasingly hot topic across many industries is traceability and transparency in supply chains, particularly when it comes to demonstrating environmental, social, and governance (ESG) credentials.

Fortunately, when discussing traceability and transparency, you’re talking the language of blockchain, something that hasn’t gone unnoticed by two of the top innovation-embracing nations of LatAm—who also happen to be among the world’s leading global suppliers of crucial agricultural goods such as soybeans, wheat, corn, sugar, and livestock.

Returning to Buenos Aires, in 2021, a local startup, ‘ucrop.it,’ announced it had raised $1.1 million in a seed round led by Closed Loop Partners and The Yield Lab LatAm. 

Ucrop.it aims to connect producers with downstream players and enable them to agree on sustainable crop production objectives. To achieve this, the app-based platform uses blockchain technology for traceability and confidential storage to protect producers’ information. 

Another Argentine project, Carnes Validadas, launched in 2019 and created a novel method to guarantee traceability throughout the beef supply chain, “from genealogy to the consumer,” using blockchain technology.

The method involves scanning the QR code of a cut of meat, with the data being added to a Rootstock (RSK) smart-contract-enabled blockchain platform to securely track all the stages it went through until it was ready for consumption. Each actor in the supply chain adds all the events, which ultimately allows for visualization of all the data on the animal’s supply chain journey, including, among other things, where it’s been, injuries, and weight.

The company claims to offer “the technology platform that unites the actors in the meat chain to add value to the information generated by each one, offering the consumer a product with complete traceability using the benefits of blockchain.”

Meanwhile, in Brazil, several of the world’s largest grains and oilseeds companies, American giants Bunge and Cargill, joined together to create the joint venture Covantis. Covantis also uses blockchain technology in the agricultural sector, but this time to streamline logistics.

The platform, launched in 2021, aims to unify the sector’s data and facilitate communication between participants—companies that together make up around 550 million tons of grains and oilseeds every year—by improving logistics processes using blockchain.

The initial scope of the platform covered the shipment and execution of bulk commodities such as corn and soybeans from Brazil to any worldwide destination. Blockchain solutions from software company Consensys enabled Covantis to create a global network for the efficient execution of bulk agricultural trade operations.

By connecting shippers, traders, and charterers through a streamlined blockchain-based network, the platform claims to optimize export trade processes significantly. According to Consensys, this includes “notice issuance and visualization, user productivity management and, in the near future, documentary instructions and document management.”

On the launch of the platform, CEO of Covantis, Petya Sechanova, said: “Two years ago, we set out on a journey to transform a system of global trade that had changed very little for the last century… We look forward to working with our partners to use this technology to enhance efficiencies and reduce operational risk in this first key market.”

Opportunities

It appears, then, that blockchain has taken root in Argentina and Brazil as a concept and in practice. While the countries may be approaching the technology from positions of very different economic security, they share a momentum to improve political systems that have proven flawed, invest in schemes and private sector initiatives that can salvage or boost their economies, and have both provided—in the form of regulatory clarity—fertile ground on which to grow the sector.

In both countries, there is also a clear opportunity for blockchain firms and the government to collaborate to their mutual advantage. For the industry, the benefits of mass adoption, legitimization, and the backing of a government willing to explore and partner with private-sector innovation are obvious.

This is demonstrated by Brazil and Argentina ranking in the global top twenty for digital asset adoption in 2024, tenth and fifteen, respectively. If more evidence were needed, December 2023 saw Brazil’s largest bank, Itaú Unibanco, launch a digital asset trading service for clients of its investment platform, representing around 60 million people. The same month, Nubank announced a partnership with digital asset giant Circle to extend access to the USDC stablecoin to its 80 million Brazilian customers.

The benefits—potential and realized—are also clear for the countries’ two governments/public sectors, as a technology that can provide improved traceability, transparency, and trust, offers numerous exciting possibilities, not least in the financial, social and bureaucratic spheres.

Add to this the ability of certain blockchains to scale almost limitlessly—one example being the BSV blockchain, whose Teranode upgrade recently processed three million transactions per second (TPS) in a test scenario—and you have a potential marriage made in heaven for two of LatAm’s mostly unwieldy and tumultuous democracies.

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