LATAM Stablecoin Liquidity Concentration Risk Sparks Concern Among Investors

Stablecoins have become a crucial tool for users in Latin America, allowing them to bypass slow or expensive transfer channels. However, a recent report by Varys Capital and Verda Ventures has highlighted a potential risk in the region's stablecoin liquidity structure. According to the report, there are only 16 companies in Latin America that primarily focus on providing wholesale stablecoin-to-fiat liquidity.

Amit Chu, partner at Verda Ventures, warned that the 'thinnest layer' of specialized liquidity providers may create systemic fragility if banking relationships for a key provider are disrupted. He emphasized that the problem lies in the 'exits' from stablecoins to local currency, where conversion costs and settlement timelines deteriorate.

Chu noted that the report's findings are based on the Stablescape database, which tracks companies involved in stablecoin-related activities. However, the database does not track transaction volumes or market share, making it difficult to measure concentration.

To reduce concentration risk, Chu suggested that licensing and clearer rules could make it easier for banks to serve liquidity providers, broadening the set of institutions that can participate in stablecoin-to-fiat conversion. He also pointed to technical and product direction, such as local-currency stablecoins and multi-desk routing, as practical ways to improve redundancy.

The report's findings are particularly relevant given the rising adoption of stablecoins in Latin America. According to a Chainalysis report, stablecoins accounted for 32.1% of cross-border crypto value in the region in June 2026, and 22.1% of domestic P2P activity.

Chu emphasized that concentration is not inherently synonymous with malfunction, but it increases the importance of redundancy. He compared Latin America's stablecoin liquidity structure to more established FX markets, where the number of dealer institutions can be limited.