Javier Milei won Argentina’s recent presidential election on an anti-establishment platform, promising to overhaul the economy and curb runaway inflation. The central pillar of Milei’s economic vision is a plan to shut the central bank and abandon the Argentinian peso in favor of the stronger U.S. dollar.
Alongside the President-Elect’s support for Bitcoin, the dollarization plan would represent a sharp break from the monetary policy of the previous government. But how would the policy work in practice? And given Milei’s pro-crypto stance, could there be a role for Bitcoin or Stablecoins in Argentina’s new economic model?
According to most analysts, Milei’s recent victory can be put down to one fact above all others: frustration with previous governments and their inability to bring inflation under control.
In the modern era, Argentina has battled runaway inflation for over a decade. From less than 5 pesos per dollar in 2012, a period of dramatic currency devaluation has seen the ARS/USD exchange rate run out of control. Today, each US dollar is worth over 350 Argentinian pesos.
To an extent, Milei’s economic policy is the conclusion of years of natural dollarization as Argentines have sought out more stable currencies.
In recent years, demand for the greenback has fueled a booming stablecoin market.
Research by Chainalysis shows that in the year to the end of May, USDT alone accounted for over 70% of all purchases on crypto exchanges using the Argentinian peso. Meanwhile, as the annual inflation rate climbed above 100% in April this year, cryptocurrency purchases in the country surged to new highs.
In the crypto press, Milei’s depiction as a committed Bitcoiner is largely attributed to a single oft-quoted remark.
When asked about his thoughts on the cryptocurrency during an interview, Milei reiterated a criticism of the central bank that was a hallmark of his Presidential campaign.
“We have to understand that the central bank is a scam. It is a mechanism by which politicians cheat good people with an inflationary tax.”
In this scheme, Bitcoin represents “the return of money to its original creator: the private sector,” he continued.
Endorsing an economic philosophy that has long been central to the cryptocurrency’s appeal, Milei contrasted the finite supply of BTC with the inflationary nature of fiat currencies. He concluded that Bitcoin is therefore the “natural reaction” to inflation caused by “scammer” central bankers.
Yet, despite his endorsement of the cryptocurrency, speculation that Argentina could follow El Salvador and recognize Bitcoin as legal tender appears to be overstated.
Of course, Argentina’s new libertarian President is unlikely to introduce policies that restrict cryptocurrency ownership. Meanwhile, investors of all kinds will welcome his promise not to raise taxes.
But as far as his anti-central bank agenda goes, Milei has been much more vocal in his support for dollarization.
Nevertheless, even without direct policy intervention, Argentina’s new leader could still impact the way the country uses crypto.
In its assessment of his vision for the economy, Grayscale wrote that it “aligns with the idea of Bitcoin as a super-sovereign currency.” The asset manager said that Milei’s Presidency represented a “meaningful step forward” for crypto adoption in Argentina. At the geopolitical level, it could even signal a “paradigm shift” in how developing economies perceive and use digital currencies, Grayscale concluded.
In the end, no one knows what the best medicine is for Argentina’s ailing economy. Dollarization and cryptocurrencies both have their supporters and detractors. Only history will be able to judge Javier Milei’s success or failure.