CryptoMarket, a Chilean exchange with 200,000 members, reported a 50% spike in purchases of the two most popular stablecoins, tether (USDT) and USD coin (USDC), during the second quarter of 2022, according to CryptoMarket Chile national manager Eduardo Pérez de Castro.

Residents of #Chile, accustomed to living in the most stable #economy in #Latin #America, are turning to #stablecoins to preserve their #investments from recent record #inflation and the peso’s rising depreciation. In the last three months, local #crypto #exchanges have seen a 50% spike in stablecoin #transactions.

#Stablecoins are a sort of #cryptocurrency whose value is tied to an external asset, such as the #US #dollar or #gold, to keep the price stable. #USDT and #USDC are tied to the US dollar 1:1.

“Today, stablecoins account for 30% of overall purchases by consumers, and they are the most likely to purchase if it is their first time using the site,” Pérez de Castro noted.

Buda.com, one of Chile’s first crypto exchanges to start in 2015, has also noticed an increased interest in stablecoins. The platform’s stablecoin market share increased from 11% in June to 20% in July. #USDC, which has been on the site for less than a year, is the platform’s third-most-traded currency, trailing only #bitcoin (#BTC) and #ether (#ETH).

“We view this as a major trend, and something consumers are taking advantage of as a way to simply buy US dollars without having to go to a bank or #exchange house,” said Jazmn Jorquera, chief operating officer at Buda, which has over 500,000 members with operations in Chile, #Argentina, #Peru, and #Colombia.

The growing popularity of stablecoins is linked to Chile’s deteriorating #macroeconomic circumstances. Year-on-year inflation in the country reached 12.5% in June, the highest level in 28 years. One month later, the #peso #currency touched a record low of 1,045 per US dollar, plummeting 3.7% in one day and requiring the #central #bank to intervene in the foreign exchange market with a $25 billion intervention to prevent further depreciation.

“The average Chilean citizen is turning to stablecoins to save money and preserve value,” Joel Vainstein, co-founder of OrionX, a Chile-based exchange with over 100,000 customers with operations in Peru and, eventually, #Mexico, stated.

USDT has been the platform’s second-most-traded currency for the previous three months.

The current unpredictability of the Chilean exchange rate, according to Pérez de Castro, is mainly related to political uncertainty. Citizens will vote in September on a critical reform to Chile’s Constitution, which hasn’t been changed since dictator Augusto Pinochet took control in 1980.

The vote is linked to what Chileans refer to as the “social outburst,” a series of protests that occurred in October 2019 in response to an increase in public transportation fares. The riots, which culminated in military violence, lasted until March 2020, when left-wing leader Gabriel Boric defeated the existing right-wing administration in the December 2021 presidential election.

In the face of such uncertainty, local banks experienced a 200% rise in demand for US-dollar bank accounts between April 2021 and April 2022. However, opening a foreign currency account in Chile is not easy.

According to Pablo Donders, a Chilean #economist specializing in #cryptocurrencies, in order to open a bank account in US dollars, residents must first open a national bank account, which requires a minimum monthly income of around $507 – or even higher – according to official reports.

“That is why many people do not have access to checking accounts, and even fewer have access to US dollar accounts, because it also requires certified papers proving you carry out a commercial operation abroad,” Donders noted.

Traditional banks such as Banco del Estado de Chile, Bank Ita, and Scotiabank, among others, began to close the exchanges’ bank accounts in 2018 due to a “lack of regulation” and “uncontrollable dangers of money laundering,” according to certain banks’ legal statements at the time.

The judgment put #bitcoin platforms in jeopardy of going bankrupt and restricted their operations in the country.

Buda.com, CryptoMKT, and OrionX, three cryptocurrency exchanges, quickly filed a complaint with the country’s Competition Court, accusing ten of the country’s largest financial institutions of “abuse of dominant position.” The Competition Court ordered banks to reopen the exchanges’ bank accounts one month later.

However, the matter is far from decided. The banks filed an appeal, and the case is still being heard at the Competition Court four years later. According to #exchanges, the trial is nearing its conclusion, and banks might face $76 million in penalty costs if they lose, according to OrionX’s Vainstein.

“The trial keeps us always tense, but at least now we have a market court judgment that offers us some protection, so we operate with an uneasy peace,” Pérez de Castro said.

In addition, the Chilean government intends to create a central bank digital currency (CBDC) and has assembled a team to prepare a white paper in the first quarter of 2022. However, the central bank delayed any decision in May, stating that “there is not yet enough information to make a final decision about the issuing of a CBDC.”