LATAM stablecoin liquidity may depend on few providers, investor says
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Written by
Simonas Brazionis - Updated 2026-10-09 06:37:23
A recent report by crypto venture firms Varys Capital and Verda Ventures reveals a potential over-reliance on a limited number of underlying liquidity providers within the LATAM stablecoin liquidity ecosystem. This concentration could expose the system to significant disruptions, particularly affecting customers' ability to convert stablecoins into local fiat currency.
Amit Chu, a partner at Verda Ventures, warned that if a primary provider loses banking access, the entire system could face challenges. The report, which analyzed 494 companies in Latin America using Verda's Stablescape database, identified only 16 firms specializing in wholesale stablecoin-to-fiat liquidity, corporate treasury services, and credit.
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Fragility of the LATAM Stablecoin Market
The research pointed to a potential fragility, noting that while many entities sell liquidity, few are actual specialists. Chu suggested that numerous liquidity sellers likely pass currency risk to the same limited number of desks and exchanges, contributing to this systemic vulnerability.
A disruption affecting a key provider could lead to users holding stablecoins while facing increased costs or delays in converting them to local currency. Such issues would primarily impact exit points, potentially widening spreads, slowing or pausing cash-outs, and trapping funds with a failed desk.
Stablecoins' Growing Importance in Latin America
Stablecoins are becoming increasingly vital to Latin America's crypto economy. A Chainalysis report from September indicated that stablecoins accounted for 32.1% of cross-border crypto value, 22.1% of domestic peer-to-peer activity, and 17.6% of personal wallet balances in the region by June 2026.
Countries experiencing significant monetary instability have shown the fastest rates of stablecoin adoption. This highlights the critical role stablecoins play in providing financial stability and accessible transactions in regions with volatile local currencies.
Mitigating Concentration Risks
To address concentration risks, Chu emphasized the need for clearer licensing regulations, which could facilitate banking services for liquidity providers. He also highlighted local-currency stablecoins as a mechanism for more market makers to settle transactions on-chain, noting that global trading firms are beginning to quote Latin American currency pairs.
Chu cautioned that a small number of specialists doesn't inherently signal a problem, drawing parallels to mature FX markets. However, he stressed the importance of redundancy and capital, advocating for each major currency to have several independent, well-capitalized desks with distinct banking relationships. Wallets should also enable routing between multiple players. The report broadly views Latin America as a growth opportunity, especially for businesses addressing cross-border payments, given the region's fragmented banking systems and high transfer costs.
