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If Argentina Accepts Bitcoin as Legal Tender – It could attract Both Crypto Enthusiast and Tax Evaders

Last Updated November 25, 2023 1:21 PM
Teuta Franjkovic
Last Updated November 25, 2023 1:21 PM

Key Takeaways

  • Dollarization and Bitcoin legal tender could boost Argentina’s economy, says expert.
  • Bitcoin Argentina VP calls for fulfillment of campaign promises.
  • Milei is committed to revitalizing Argentina’s economy by dismantling the central bank and abandoning the Peso.

Following an extensive and intense presidential campaign, libertarian contender Javier Milei emerged victorious in Argentina’s presidential election on November 19.

Milei, advocating for the abolition of the country’s central bank and presenting a series of radical policy proposals that captured the attention of the crypto community, secured the win with 55% of the electorate’s support. With 99% of the vote counted on the declared date, Milei outpaced his rival, Sergio Massa, by three million votes.

Dollarization and Bitcoin Legal Tender Could Boost the Economy

Crypto legal expert David Lesperance told CCN that dollarization in Argentina  could lead to an increase in Bitcoin adoption. If Argentina dollarizes its economy, people will be more likely to hold Bitcoin as a store of value instead of the Argentinian peso, which has a history of inflation .

Lesperance also pointed out that Bitcoin is a more attractive option than other currencies in times of financial instability. He noted that people turned to Bitcoin to protect their wealth during the financial crises in Russia, Asia, and Cyprus.

Additionally, Lesperance argues that Bitcoin is easier to access than other currencies in some countries. Argentinians should hesitate to open up US dollar account with Argentine banks as these have been frozen or restricted in the past, he said. For example, he notes that it is easier for Argentinians to buy Bitcoin than it is to open a US dollar account with a US bank.

Overall, Lesperance believes that Bitcoin is a valuable tool for people who live in countries with unstable economies. He argues that Bitcoin can help people protect their wealth and avoid capital controls. For Americans, who are uniquely subject to citizenship based taxation, simply establishing an Argentinian tax residence is not enough to relieve them of their US tax burden. Some Americans try to use the US tax advantages of Puerto Rico, but fail to meet the requirements because they do not spend the obligatory 183 days ‘on island’ required for the benefits to accrue.

Millei Facing Inflation Challenges

Upon assuming office, Milei faces the immediate challenge of reining in Argentina’s soaring inflation , which skyrocketed to 143% in October.

To put this into perspective, the peak inflation in the United States  was 9.1% in June 2022 and has since decreased to 3.2%.

The precipitous decline in the purchasing power of the Argentine peso likely influenced voters to support a candidate advocating for substantial cuts in public expenditure and a reduction in the size of the government.

Lesperance told CCN that if Argentina dollarizes its economy and accepts Bitcoin as legal tender, it could make the country more attractive to foreign individuals and businesses, as their crypto will give them tremendous consumer purchasing power.

For those foreigners who believe that Argentina will assist them to evade tax, Lesperance cautions that they need to be aware of what is required to leave their current tax jurisdiction’s liability. For some like current Canadian tax residents they need to establish tax residence in Argentina.

He mentioned crypto-influencer and ex-presidential candidate  Brock Pierce as a valid example of a tax evader.

“Brock Pearce has to be 183 days in Puerto Rico to meet the requirements for the Puerto Rican tax advantages and the guy decided to run first for senator then for president. Well, in order to be a senatorial candidate in Vermont, you got to be out there 183 days, so 100 and 18300 and you have 364 days. He’s offside somewhere. And if you’re going to be a crypto person and you’re going to live a social media life, you better make darn sure that you’re meeting that requirement,” Lesperance asserted.

He added:

“Again, cheating the game is a fool’s game. So you either play the game better by moving to a low tax state, you properly leave the game and do that as officially as possible. But cheating the game while you thought you were being really clever by trying to show that you were in Argentina or Puerto Rico because you gave your gardener credit card to buy like gas and groceries, right? Well, guess what? Now you’re willful. So it’s not just the civil penalties and interest and stuff. Now you’re talking tax evasion, now you’re talking criminal,” he stated.

He argues that this could be done by offering tax incentives to those who relocate to Argentina, such as a flat tax rate or a one-time fee for residency. This could attract wealthy rezidents from countries with high tax rates, such as Canada and Europe.

Additionally, Argentina could benefit from the spending of these individuals and businesses, which would help to boost the economy. Overall, Lesperance believes that dollarization and Bitcoin adoption could be a positive development for Argentina.

Dismantling Central Bank, Abandoning Peso, and Slashing Welfare

Milei is committed to overhauling and revitalizing Argentina’s economy through a fundamentally different approach. The principles that underscore the policy agenda of this libertarian anarcho-capitalist are likely to find resonance within the crypto community.

His key policies involve dismantling the central bank to curb money printing, abandoning the Argentine peso in favor of the U.S. dollar, and eliminating nearly all forms of welfare in the country.

In a dramatic video  circulating on social media, the president-elect outlined his future plans for government departments. Milei declared, “Ministry of Sports and Tourism — out! Ministry of Culture — out! Ministry of the Environment and Sustainable Development — out!” Each announcement was punctuated by Milei physically removing the name of the department from a whiteboard and discarding it.

Bitcoin Skeptic or Crypto Sympathizer?

While President-elect Milei embodies a maverick spirit that resonates with Bitcoin enthusiasts and aligns with the ideological leanings of the cryptosphere, it’s crucial to note that this doesn’t necessarily translate into active support for the cryptocurrency.

In a video posted to Reddit’s r/bitcoin  about 11 months ago, Milei articulated his perspective on Bitcoin as a monetary instrument free from state control. He highlighted the central bank as a “scam” used by politicians to impose inflationary taxes on the public. According to Milei, Bitcoin represents a return of money to its original creator—the private sector.

However, despite acknowledging the utility of Bitcoin in countering state-controlled monetary systems, it’s important to recognize that Milei’s views, as expressed in the video, don’t explicitly indicate a proactive endorsement or support for the cryptocurrency.

He said :

“Bitcoin is the natural reaction against central banker scammers and to make the money private again.”

While the new president may commend Bitcoin as a financial instrument and express views that align with some aspects of the cryptocurrency, it’s essential to distinguish between appreciation for its utility and a full endorsement. The sentiments expressed by the president may not necessarily align with the aspirations of ardent Bitcoin advocates who may wish for a more robust embrace of the cryptocurrency.

Undoubtedly, there are segments within the crypto community and beyond who harbor hopes that Argentina might consider adopting Bitcoin as legal tender, akin to the approach taken by countries like El Salvador. However, the president’s current stance, as articulated, falls short of explicitly signaling such a transformative shift in the country’s monetary policies.

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