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Argentina’s Double-Down on Blockchain Could Spark Economic Revival

Last Updated January 20, 2024 1:12 PM
Teuta Franjkovic
Last Updated January 20, 2024 1:12 PM

Key Takeaways

  • Argentina could be turning to cryptocurrency amid inflation crisis.
  • President Milei’s pro-crypto stance aligns with Argentina’s growing adoption.
  • Cryptocurrency might be a potential catalyst for Argentina’s economic revival.

In Argentina, inflation has severely eroded the value of savings . For instance, if you had saved an amount equivalent to $100,000 in Argentine pesos back in 1995, it would only be worth approximately $310 today.

As of November 2023, the country was grappling with an alarmingly high inflation rate, reported  to be around 210%.

Argentina Embraces Cryptocurrency Amid Economic Challenges

Amid economic turmoil, Argentina’s population is increasingly adopting cryptocurrency as a viable payment method and a means of preserving earnings. Under the leadership of new ‘minarchist’ president, Javier Milei, the country is poised to leverage blockchain technology to stimulate much-needed growth.

To facilitate this transition, the government must foster a crypto-friendly environment for both retail and blockchain. At the same time, domestic and international businesses who deal with Argentina’s workforce are encouraged to recognize crypto as a legitimate payment and transaction method.

In Argentina, there’s a noticeable shift towards cryptocurrency, with stablecoins like USDT  and DAI becoming increasingly popular, especially in informal foreign exchange and crypto markets, known locally as Cuevas . These ‘caves’ see a high volume of peso conversions to more stable currencies due to the unreliability of the Argentine peso.

The trend is particularly evident among the country’s freelancers, who make up over 28% of the employed population. A significant portion of these 12.6 million freelancers, over half, receive their payments in cryptocurrency . Many work for overseas companies, bringing earnings into the national economy. To maximize this capital inflow and its impact on economic growth, the government should actively support and promote cryptocurrency usage within and beyond the gig economy.

President Milei Advocates for Blockchain in Argentina

Argentina’s President Javier Milei is proving to be a staunch advocate for blockchain technology, aligning well with the country’s increasing affinity for cryptocurrency. His supportive stance is a rarity among global leaders. Milei has emphasized the importance of individual contracts in the market, reflecting his vision for an economy driven by market forces rather than bureaucratic oversight.

Milei explained his stance  on a more decentralized future:

“We have to understand that the Central Bank is a scam. What Bitcoin represents is the return of money to its original creation, the private sector.”

Milei is steering Argentina towards a dollar-based economy, advocating for the abolishment of ‘legal tender’ laws. This move paves the way for the free use of various currencies and digital assets, including stablecoins and cryptocurrencies. As the country transitions towards the dollar, cryptocurrencies are positioned as an intermediary, facilitating smoother financial operations.

He has already initiated this change. For instance, in December, Milei legalized contract signing  with Bitcoin and other cryptocurrencies. Companies engaging with Argentina’s workforce are encouraged to offer alternative payment options. This means they could both access a broader talent pool and capitalize on this innovative shift.

Crypto As a Catalyst for Argentina’s Economic Revival?

For Argentina’s workforce, cryptocurrencies could provide a safeguard against inflation, preserving the value of their earnings. Meanwhile, employers could benefit from simpler international transactions and reduced dependence on unstable local banking.

However, the path to widespread crypto adoption is not without challenges. Domestic firms will need to recognize and promote cryptocurrency as a valid payment method, while the government has to create a supportive environment. This integration could be more than a financial experiment – it’s a strategic step towards economic recovery and stability. If these changes are implemented, cryptocurrency could provide financial stability for Argentina’s workforce and economy.

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