Bitfinex Securities just dropped a new report. It digs into how tokenization can open up financial access, especially in Latin America. The study points out the big hurdles people and businesses face there.
The report, called “Market Inclusion in Latin America,” debuted at Cripto Latin Fest. It’s the first deep look at why traditional capital markets are tough to get into for both companies and investors. Experts from eight countries helped with the research, mixing interviews with detailed document review.
They found a few big problems. Banks hold too much power, fees are too high, and there’s a lot of red tape. Issuing new financial products also costs a ton. Bitfinex says these issues create “liquidity latency.” This means money isn’t getting where it needs to go efficiently, all thanks to old-school business ways.
Financial Roadblocks in Latin America
Businesses in Latin America struggle with high costs and complex steps to raise money. Meanwhile, everyday investors don’t have enough options or financial know-how. Take Brazil and Argentina, for example. Their tricky rules put them low on the World Bank’s Ease of Doing Business Index. This makes local and foreign investors shy away.
The market itself isn’t very deep either. Latin America has over 600 million people, but fewer than 50 companies worth more than $1 billion. The United States, with half the population, has over 1,200 such companies. This lack of venture capital and startup funding means less new ideas and growth.
Adding to the problem is how concentrated the banking sector is. Not long ago, just five banks controlled 70% of accounts in major Latin American markets. This centralization let them charge some of the world’s highest fees, sometimes up to 17%. Such high costs make it hard for money to move around freely.
Tokenization Steps In
The report highlights how tokenized offerings beat traditional ways. They cut out middlemen and use performance-based fees. This can make the cost of issuing financial products much lower. For instance, raising $50 million could mean success fees of only 2% to 4%. That’s a big drop from the average 7% in traditional markets.
Listing products also gets faster, taking 60 to 90 days instead of much longer waits with old banks. Plus, tokenization allows for fractional ownership and 24/7 trading. This means small investors can buy parts of expensive assets for as little as $1. This even includes tokenized U.S. Treasury bonds.
Jesse Knutson, who heads operations at Bitfinex Securities, believes tokenization is a game-changer. He says it’s “the first genuine opportunity in generations to rethink finance.” It removes the old barriers that kept companies and individuals, especially in developing countries, from getting capital.
The study also notes that rules are catching up. El Salvador, for example, made Bitcoin legal tender in 2021. Then, in 2023, it legalized tokenized assets. Bitfinex Securities was the first company to get a license under this new law. Other nations like Argentina, Brazil, Chile, Colombia, Panama, and Peru are also working on rules. These changes could open the door for more people to use these new financial tools.
Colombian experts Edgar Ricardo Jiménez, a capital markets professor, and Andrés Restrepo, a financial lawyer, contributed to the report. They think tokenization can fix long-standing liquidity issues in the region. It can also bring more people into the financial system and narrow the gap between big institutional investors and small individual ones.
A Clear Path Forward
Will Hernández, Bitfinex’s Business Development Manager for Latin America, wrapped up the report’s presentation with a strong message. He said businesses and investors of all types in Latin America have a “unique opportunity” to grasp and use the power of Bitcoin and other cryptocurrencies. Digital assets offer real benefits for operations, payments, and reaching communities that banks often ignore. Being an early adopter in this area is a smart move for long-term growth. Ignoring it simply isn’t an option anymore.
Looking ahead, the report predicts the global market for security token offerings (STOs) will grow 75 times by 2030. This makes tokenization a vital tool. It can make investing more open to everyone and boost financial inclusion across Latin America.