Following the collapse of FTX and Alameda Researchdiscussions on the financing of Web3 projects has become a sensitive issue. The number of people who kept their savings and the number of relationships between different companies, banks, funds and managers put even more strain on the sector. The fall of naive entrepreneurs has been considerable. However, this has contributed to the contraction of venture capital.
More than 50 companies in the crypto ecosystem have a relationship with FTX. (Fuente: Fortune).
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More than 50 companies in the crypto ecosystem have a relationship with FTX. (Fuente: Fortune).
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Add to this the inequality of financial inclusion between countries, and the topic of financial resources for entrepreneurship becomes shorter when it comes to the availability of investments and the diversification of digital financial instruments. The last thing we should prioritize is projects based on the use and trust of technologies that most Latin American countries don't even understand.
In Mexico for example, a country lagging behind in terms of innovation compared to its South American peers, even if the number of businesses created recovered after the pandemic, 13% of the adult population creates a businessaccording to GEM data.
According to this international survey, informality will prevail in 2023 due to the post-pandemic phase. However, this only contributes to creating tensions around purely digital solutions.
The high cost of administrative procedures (in time and money), lack of access to financing and lack of training in areas such as finance, accounting or business development are the main challenges of formal entrepreneurship in Latin America.
Added to this is the lack of job quality. According to the 2020 and 2021 Business Demographic Studies (EDN) carried out by the National Institute of Statistics and Geography (Inegi), approximately 1.6 million businesses well before the Covid-19 pandemic found it necessary to permanently close their doors, directly affecting the economic income of millions of people in recent years, despite the birth of more than 619,000 new ones. However, this has led the country to increase informality and not innovation.
New hope for Web3: Latin America
Not everything is informal in Latin America. More … than 20% of businesses thrive on scams or informalitybut “there are many communities and projects in Latin America, to the extent that it is becoming a sector that stimulates blockchain, but it is also necessary to develop education and information”, explains Mónica Talán, CEO of Cryptoconexion.
For example, 33 Latin American unicorns are already present in the venture capital markets. Among them is Bitso, a cryptocurrency platform. Talán explains:
“People are not waiting for others to run the platforms in these countries. They research, inform and create the ecosystem based on information and opportunities to leverage technology and community while deciding to open doors. They generate approaches, which means that in Latin America, blockchain works within use cases relevant to the region.
For example, digital identity and verifiable credentials are supported by this technology. But they also help to improve traceability and financial distribution. Compared to its beginnings, the blockchain ecosystem has shown that it goes beyond cryptocurrencies, mainly because Web3 companies are in a development phase where innovation and disruption are the key characteristics.
Type of inversion carried out by entrepreneurs in Latin America. (Fuente: Endeavor Intelligence)
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Type of inversion carried out by entrepreneurs in Latin America. (Fuente: Endeavor Intelligence)
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In Latin America, growth rates in demand for blockchain technology and businesses show substantial increases “to the extent that we have reached more than 90,000 projects per year in countries like Mexico, Argentina, Brazil and Colombia, generating 999 or more jobs,” confirms Talán. .
The reasons, according to Mónica Talán, are:
- Blockchain projects offer innovation to territories. “In Argentina, a project encourages beach cleaning and pays in crypto. At the same time; they have integrated nearby businesses to accept crypto payments.”
- New financing programs are created. Although it started with the initial coin offering (ICO), today there are three new ones: grants, hackathons, and bounties.
- A community network. For those immersed in crypto, talking about community means understanding that blockchain means connection, that is, it is not limited to one region or time, and that its growth is the responsibility of each within it.
- Government interest. Not only is El Salvador presenting proposals, but countries like Brazil also have regulatory laws for business participation with blockchain technology, making entrepreneurship more accessible in that country.
- They seek transparency. Blockchain-related companies offer transparency not only in their movements but also in their actions. Private banking could use blockchain to record and transfer digital assets securely and transparently, improving the efficiency and security of asset management.
- Cost reduction. This can have a significant impact on the financial inclusion of financial institutions and consumers. By eliminating middlemen and automating processes, blockchain technology improves efficiency and transparency in the financial sector.
Education and Scholarships, the stages of Web3 growth
Cryptoconnection has focused its efforts on Web3 through courses, sessions on the secure use of projects or platforms, understanding these new products and their evolution, and the use of blockchain to protect data.
“I am very proud to say that 46% of our audience is made up of women. Therefore, for me, blockchain is not just a cryptocurrency, it is much more. Nevertheless, it is also true that cryptocurrencies are the powerhouse of technology. I think about the future, a future where technology will become essential, where the financial ecosystem will grow and with it cryptocurrencies will be included. This growth is supported by the development and growth of the sector.”
For Talán, blockchain has evolved from a technology only available in English to one where Spanish-language content has become a priority. Companies in this sector have started to look to regions like Latin America for three reasons:
- Access facility.
- Country updates.
- A necessary financial decentralization on the part of Internet users.
“With Web3, protocols change; investors want worthwhile, solid and impactful projects to invest money in and think about who they will work with. This is when it is necessary to create a more effective system like that of subsidies to guarantee and avoid, at the same time, situations like FTX. This is a normal situation, because, as with the Internet, the impact of an ecosystem generates a temporary boom and only companies or businesses that think about real solutions manage to survive. Therefore, the grants go beyond a simple opportunity,” concluded Talán.