Argentina is groaning under hyperinflation. Prices have risen by almost 95 percent in recent months – the highest level in 30 years. The exorbitant price increases are causing more and more citizens to flee to crypto. Some are even talking about the next El Salvador.
The situation in Argentina is tense. The country is experiencing one of the most severe economic crises in its history. The exchange rate of the peso fluctuates daily and a government-imposed conversion limit into US dollars keeps citizens trapped in its own monetary system. So it’s hardly surprising that the inhabitants of the Latin American country are looking for ways to secure their dwindling prosperity. An increasingly popular means of doing this: cryptocurrencies.
In the “Global Crypto Adoption Index” by Chainalysis, Argentina ranks 13th out of 146. In the survey, the US analysis company measures the proportion of income that people invest in Bitcoin and Co. Stablecoins such as USDT or USDC are particularly popular. Despite the crash, some citizens accept their salaries entirely in cryptocurrencies, reported Bloomberg and relies on data from the accounting firm Deel. According to Argentine law, however, only a maximum of 20 percent of the salary may be paid in cryptocurrencies.
Loss of trust in banks fuels crypto hype
The fact that so many are now dealing with Bitcoin and Co. is due to a loss of trust in the banking system, which has been building up in the Argentine population for decades. Traditional money houses had already tried to counter the suspicion by offering crypto services themselves. Banca Galicia, for example, announced a corresponding function for its customers in May last year. A few days later, the Argentine central bank conceded the project.
Citizens should disclose crypto investments
Instead, the Argentine government wants to get citizens to disclose their crypto holdings. To this end, the Ministry of Finance recently submitted one to Parliament Draft before. The measure was officially intended to help fight money laundering. The disclosure is based on “voluntary” but non-disclosure could result in investigations, the letter said. In the past, tax authorities in Argentina have seized bitcoin wallets.
Argentina and Brazil plan common currency – chance for bitcoin?
Meanwhile, Argentina and Brazil are planning a common currency in order to further emancipate themselves from the US dollar. This was stated by the presidents of both countries in a joint opinion article in the Argentine weekly Perfil. If successful, the project could be extended to other South American countries.
Representatives of the crypto sector took the report as an opportunity to submit suggestions for possible candidates. Right at the forefront: Bitcoin. So explained Coinbase CEO Brian Armstrong on Twitter: “I wonder if they (Argentina and Brazil, ed.) are considering bitcoin. In the long term, it would be the right move.”
The situation is reminiscent of El Salvador. The country in Central America was also highly dependent on the US dollar and decided to introduce Bitcoin as the state currency in September 2021. However, the balance sheet is mixed.