Why does Latin America need to get more involved with Web3?

With the growth of innovation in technology integration, the landscape has become more competitive due to the slowdown of venture investment in startups. Why opt for Web3? Mónica Talán, from Cryptoconexion, gives some hints on how to get ahead with these challenges.
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Following the collapse of FTX and Alameda Research, discussions on funding for Web3 projects became a sensitive issue. The number of people who kept their savings and the number of relationships among different companies, banks, funds, and managers strained the sector further. The fall of naïve entrepreneurs has been substantial. However, this has contributed to the contraction of venture capital.

Over 50 companies in the crypto ecosystem had a connection with FTX. Source: Fortune.
Over 50 companies in the crypto ecosystem had a connection with FTX. (Source: Fortune).

Add to this the inequality of financial inclusion among countries, and the topic of financial resources for entrepreneurship shortens regarding investment availability and diversification of digital financial instruments. The last thing we should prioritize is projects based on the use and trust of technologies that most of Latin America do not even understand.

In Mexico, for instance, a country that has lagged in innovation compared to its South American peers, even though the number of companies created has recovered after the pandemic, 13% of the adult population is starting a business, according to GEM data.

According to this international survey, informality prevails in 2023 due to the post-pandemic phase. However, this only contributes to creating tension concerning purely digital solutions.

The high cost of administrative procedures (in time and money), the lack of access to financing, and the lack of training in subjects such as finance, accounting, or business development are the main challenges for formal entrepreneurship in Latin America.

Added to this is the lack of job quality. According to the Business Demography Studies 2020 and 2021 (EDN) conducted by the National Institute of Statistics and Geography (Inegi), approximately 1.6 million businesses well before the Covid-19 pandemic found the need to close their doors permanently, directly affecting the economic income of millions in recent years, despite the birth of more than 619,000 new ones. However, this led the country to increase its informality, not innovation.

New Hope for Web3: Latin America

Not everything is informality in Latin America. More than 20% of companies thrive on scams or informality, but “there are many communities and projects in Latin America, to the extent that it is becoming a sector that drives blockchain, but it is also necessary to expand education and information,” says Mónica Talán, CEO of Cryptoconexion.

For instance, 33 Latin American unicorns are already in the venture capital markets. Among them is Bitso, a cryptocurrency platform. Talán explains:

“People don’t wait for others to lead the platforms in these countries. They search, inform, and create the ecosystem based on the information and opportunities to leverage the technology and the community while deciding to open doors. They generate approaches, meaning, in Latin America, blockchain works under use cases relevant to the region.”

Digital identity and verifiable credentials are supported by this technology, for example. But they also contribute to improving traceability and financial distribution. Compared to its beginnings, the blockchain ecosystem has shown that it goes beyond cryptocurrencies mainly because Web3 ventures are in a development stage when innovation and disruption are the key features.

Types of investment made in entrepreneurs in LatAm.(Source: Endeavor Intelligence)

In Latin America, the growth rates regarding the demand for blockchain technology and companies show substantial increases “to the extent that we have reached over 90,000 projects annually in countries like Mexico, Argentina, Brazil, and Colombia, producing 999 jobs or more” confirms Talán.

The reasons, according to Mónica Talán, are:

  • Blockchain projects offer innovation for the regions. “In Argentina, a project encourages cleaning beaches and pays with crypto. At the same time; they integrated nearby businesses to accept payments in crypto”.
  • New financing schemes are being created. Although it started with the initial coin offering (ICO), nowadays, there are three new ones: grants, hackathons, and bounties.
  • A community network. For those immersed in crypto, talking about community means understanding that blockchain signifies connection, which is it’s not limited to one region or time, and its growth is everyone’s responsibility within it.
  • Government interest. Not only does El Salvador present proposals, but countries like Brazil also have regulatory laws for business participation with blockchain technology, making entrepreneurship more accessible in that country.
  • They are seeking transparency. Companies linked to blockchain offer transparency not only in movements but also in their actions. Private banking could use blockchain to securely and transparently record and transfer digital assets, improving efficiency and security in asset management.
  • Cost reduction. It can significantly impact financial inclusion for financial institutions and consumers. By eliminating intermediaries and process automation, blockchain technology improves efficiency and transparency in the financial sector.

Education and Grants, the steps to the growth of Web3

Cryptoconexión has focused its efforts on Web3 through courses, sessions on using projects or platforms safely, understanding these new products and their evolution, and using blockchain to protect data.

“I am very proud to say that 46% of our audience are women. Therefore, for me, blockchain is not just a cryptocurrency, it’s much more. Nevertheless, it’s also true that cryptocurrencies are driving the technology. I think about the future, one where technology becomes essential, the financial ecosystem grows and with it, cryptocurrencies are included. This growth is supported by the development and growth of the sector”.

For Talán, blockchain went from being a technology only available in English to one where the content in Spanish became a priority. Companies in this sector began to look at regions like Latin America for three reasons:

  1. Ease of access.
  2. Country updates.
  3. A necessary financial decentralization by internet users.

“With Web3, the protocols change; investors want valid, solid projects with impact to invest money and think about who they will work with. That’s when the need arises to create a more efficient system like grants to ensure and avoid, at the same time, situations like FTX. It’s a normal situation, given that, as with the Internet, the impact of an ecosystem generates a temporary boom, and only those companies or enterprises that think about real solutions manage to survive. Hence, grants look beyond just an opportunity”, Talán concluded.

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