Many bitcoin proponents share the belief that digital currency and its underlying technology can radically transform how the world transacts.

They believe the technology can remove the restrictions that have long prohibited economic development in emerging markets: high remittance costs, volatile government-issued currencies and capital controls.

One area that has been of particular interest to the community is South America, where supporters say bitcoin can offer real utility to consumers and business owners. Both groups have long sought alternatives to local fiat currencies and better ways to spend money online, given the region's relative lack of bank card penetration.

However, despite the community's hopes that digital currency will thrive in South America, real challenges to bitcoin's long-term success in the region remain.

Furthermore, unlike the US on the global stage, none of the region's 14 member nations have yet emerged as a clear leader in terms of setting official policy and promoting job creation by supporting the industry.

One way to determine the frontrunner in the region's ecosystem would be to assess overall bitcoin adoption, and publicly available data on Bitcoin-QT wallet downloads reveals that Argentina and Brazil have emerged as the clear leaders.

The free wallet has been downloaded nearly 90,000 times in Brazil, where bitcoin penetration is twice as high as in Argentina. Chile, Colombia and Venezuela also show small, but notable, bitcoin user populations.

Although these figures sound impressive, combining recent population estimates together with this data reveals a market penetration rate of less than 1% in both Argentina and Brazil.

However, it's important to take into account that this data does not include all of the many bitcoin wallets available so the currency's overall penetration may be higher.

Regardless of the high number of wallet downloads in Brazil, leading bitcoin community members believe that the region's lone Portuguese-speaking nation could be poised to lead the local bitcoin movement, both in terms of adoption and on matters of regulation.

Steven Morell, chief programming officer for Moneero, is one local entrepreneur that sees a bright future for bitcoin in Brazil, although his stealth bitcoin startup is based in Uruguay.

Morell suggested that bitcoin could solve real problems for Brazilians, telling CoinDesk:

Matías Bari, co-founder of Argentina-based bitcoin brokerage SatoshiTango, similarly believes the country's sheer size and economic power will make it a market leader in the region. Although Brazil's forecast for economic growth has seen setbacks in recent months, it remains a regional powerhouse and the seventh-largest global economy.

"Brazil will have more influence because they are 200 million people and one of the largest economies in the world. Internet penetration and e-commerce volume are growing really fast in this country as well," Bari told CoinDesk.

Still, others aren't so certain. In addition to the lack of overall bitcoin news that has emerged from the region, some experts have pointed to the current economic situation in Brazil as cause for concern.

Ana Pereya, who offers financial advisory services for local bitcoin startups through her firm AMP & Associates, for example, cites the influence of the country's traditional financial institutions as a potential roadblock.

She told CoinDesk:

Although Brazil may be the region's sleeping giant, so far Argentina has been the most prominent country in Latin America within the bitcoin community. This is, in part, due to the number of startups seeking to serve the Argentinian market.

Notable businesses targeting the area include Bitex.la, BitPagos, SatoshiTango and Unisend, though not all are based in Argentina due to concerns about working with local banking partners. For example, Unisend, the region's only order-book exchange, had its accounts closed this July.

Given Argentina's traction, however, a number of experts in the region believe that the country will lead the charge for bitcoin use. Furthermore, many in the industry believe Argentina will have the biggest effect on regional policy.

BitPagos CEO Sebastian Serrano went so far to suggest that Argentina is already serving as a successful model for its neighbours. In particular, he noted how the country's community was able to educate local lawmakers about bitcoin early on, thereby avoiding the kind of restrictive policies passed in Ecuador and Bolivia.

Serrano said:

Still, there are those who aren't as optimistic. Bitcoin investor and part-time Ecuador resident Paul Buitink suggested that "things look more grim every day" in Argentina, citing the issues Unisend reported.

Unlike his peers, Moneero's Morell was emphatically opposed to the idea that Argentina could become the region's digital currency leader.

Calling it "a crazy idea," he told CoinDesk:

Such concerns aside, consumers in the country are turning to bitcoin for economic protections, meaning the people may have the final say on bitcoin's future. On 21st August, the Argentine peso hit a record low against the US dollar, and the currency is devaluing quickly.

Argentine peso drops to new low, -50% since jan 2013: pic.twitter.com/Mm0Prppb47

— Tuur Demeester (@TuurDemeester) August 26, 2014

Although much conversation is centered around the countries that could positively impact Latin America's bitcoin ecosystem, Venezuela is often cited as a force of the opposite effect, influencing countries to adopt bitcoin bans.

Rodrigo Batista, CEO of Brazil-based bitcoin exchange Mercado Bitcoin, noted that Venezuela could greatly influence the Bolivarian Alliance for the Peoples of Our America (ALBA) nations, which include Bolivia, Cuba, Ecuador, Nicaragua and six others.

Batista explained that the cultural and historical differences between these countries and others in Latin America are vast, and that this could have a stifling effect on bitcoin adoption, saying:

He also pointed to the region's virtual currency, the SUCRE, as evidence of its economic controls. In the late 2000s, the SUCRE was introduced to replace the US dollar as a medium of exchange, and Batista cited it as a contributing factor to bitcoin bans observed in Bolivia and Ecuador.

Given this history, many of the experts CoinDesk spoke to said they believe Venezuela is a country that could soon ban bitcoin, though Argentina, Colombia and Peru were also cited.

Notably, however, the nation received its first exchange, SurBitcoin, earlier this August. The country's central bank has also yet to adopt a formal stance on bitcoin.

Of course, while the local industry speculates about future regulatory decisions, regional central banks have already begun to weigh in on the subject, issuing warnings that echo the sentiment of many other governments around the world.

For example, amid fears that Colombia's central bank would ban bitcoin, the central bank issued a warning against digital currency use. Argentina and Brazil have also issued consumer warnings this year. Bolivia and Ecuador, on the other hand, have moved to ban bitcoin's use entirely.

Serrano noted that Argentina's policy is still in its early stages, and that it remains too early to tell just how the nation's lawmakers will regulate bitcoin. Two more local government organizations are expected to soon issue opinions on the matter that could influence the nation's eventual policy, he said, adding:

Still, Morell notes the larger issue is that it remains unclear what authority the region's central banks have to ban bitcoin use, suggesting its too early to say whether any country in South America has yet closed the door to bitcoin entirely.

He concluded:

Additional insight was provided by Bitcoin Colombia's Carlos Mesa, Bitcoin Suramérica's Roman Parra, and Bitex.la's Fran Buero.

Havanna graffiti, Sunrise over Rio and other images via Shutterstock