Enrique Suárez
MountX Real Estate Capital
Startup Contributor

Digital Assets in Latin America: Let the Revolution Begin

By Enrique Suárez | Thu, 05/27/2021 - 09:10

The pandemic has certainly scaled up the demand for digital financial services worldwide, and Latin America is no exception. Historically, the region had always been challenged economically and politically, with poor infrastructure and low financial inclusion

But the situation changed in the last 10 years with the growth of mobile communications, which provided a fertile field for the area’s financial and technical development: according to 2020 World Bank data, 51 percent of the population have bank accounts, but only 35 percent actually use them. Wow, half of the population is still underbanked! Imagine the potential for fintech projects and digital assets in the region.

Still, the Latin American banking system is overly regulated and built upon high transaction fees and cumbersome account opening processes. Oligopoly has its negative effects: with a small group of institutions holding 90 percent of total assets, market participants do not need to improve their services, implement new products or compete for clients. Major banks are still reluctant to cooperate with each other.

Local fintech projects, meanwhile, are raising investments at full speed and continue developing. According to a report published by The Economist Intelligence Unit, fintech and renewable energy have already been the fastest-growing sectors of the economy for three years in a row. And this trend is confirmed by major deals and investments in the region.

One of the largest opportunities for the region is in private capital markets, which overshadow public markets in value and growth but are dogged by inefficient and opaque processes. Now, the market has the opportunity to change this through tokenized assets and digital platforms powered by distributed ledger technology (blockchain).

The benefits of digital platforms include more efficient administrative processes, embedded transparency and governance, and, eventually, an expanded set of product options for giving access to a larger pool of investors.

The biggest opportunities lie in private debt, equity and real estate, given their relative inefficiency compared with public market infrastructure. These are companies and projects where the tokens accrete real economic value, and these companies are also the ones attracting the most user and revenue growth. 

To have a better understanding of the ecosystem, let's talk about four types of digital assets.

Cryptocurrencies / Money - These are decentralized tokens that aim to be a store of value, or a medium of exchange. By market capitalization, they dominate the digital assets world, and thus the mainstream media coverage and the popular vernacular. Bitcoin, of course, is the most dominant today but the faster you look beyond cryptocurrencies, the faster you’ll learn what this asset class really offers.

Asset-backed tokens - These tokens barely exist yet, but are coming to market quickly.  Tokens backed by equity, debt, legal contracts, and hard assets like real estate are coming, with major financial firms and individuals beginning to explore issuing these types of assets because they are cheaper, more efficient or open up new forms of asset purchases. 

Pass-through securities - Perhaps the least known, and most interesting part of the digital assets market, these are flexible token structures issued by real companies that can seemingly serve any purpose. In some ways, they are similar to SPACs (special purpose acquisition companies) or black boxes where you put your trust in the management team. This is the most dynamic investment structure ever created, as companies can pass through revenues, profits, user growth or rewards all in one investment vehicle. 

NFTs (non-fungible tokens) - These give you digital rights to unique assets that cannot be traded or exchanged at equivalency, therefore are not interchangeable. NFTs can be used to represent items such as photos, videos, audio and other types of digital files.

As Latin Americans tend to distrust online financial transactions and fear fraud, identification, blockchain and biometrics projects are also gaining ground. Positive trends are also observed: according to 2020 data, 33.9 percent of respondents from Mexico, Columbia and Chile said that they did much more shopping via their smartphones than before. This share is even higher in Brazil: 42 percent of people in the survey stated that the frequency of their online purchases did not change while 74 percent said that they bought something using their smartphone more than two times in the last 12 months. So, there is a need for convenient payment services, microlending, digital trading and cybersecurity.

The post-COVID period made people look for alternative ways of saving and multiplying their money. Here is where MountX can help. We are a fractional ownership investment platform that helps millennials who want to invest, engage exclusive real estate projects at accessible prices, with a secure and proven system within an international community. We believe in improving the life of millenials by enabling global access to real estate assets, providing inclusion, transparency and tradability. We believe that technology enables global opportunities and we stand for a culture of autonomy, trust and contribution.

Last November, we successfully tokenized the first ever real estate in Mexico, and today we are offering investing opportunities in Canada and the US for Latin American investors. To learn more about MountX, visit www.mountx.io or contact us at team@mountx.io

Photo by:   Enrique Suárez