“The Central Bank is currently analyzing various scenarios to verify that transactions involving [cryptocurrencies] do not constitute a risk to those aspects which monitoring is expressly stated in its Charter. The so-called “ virtual coins " are not issued by the Central Bank or any other international monetary authorities therefore have no legal tender and have no support . Also, there are no governmental mechanisms to ensure its official value. Virtual currencies have shown great volatility so far and have experienced substantial price changes. These implications, the risks associated with transactions involving the purchase or use of virtual coins as payment, are borne by users.”
While this may seem like an echo of warnings released by other central banks, this particular statement can be interpreted from various angles.
First, the mention of cryptocurrencies not having “legal tender” status may be a caveat for not only citizens but financial institutions in the country to refrain from using these currencies. On the other side, the Central Bank is promising to study these “virtual coins” and potentially creating a legal framework for regulating cryptocurrencies in Argentina.
A Bitcoin hotbed
In a country with strict capital controls, which do not allow currency exchange for above 20% of an individual’s income, impose high credit card fees for overseas transactions, and where it is also illegal for citizens to buy gold, Argentina’s warming towards Bitcoin and other cryptocurrenices is certainly not surprising.
Wences Casares, CEO of Xapo said:
“I grew up in Argentina, my parents were sheep ranchers, and I saw them lose everything at least three times. Once because of inflation, once because of deflation and once because their savings were confiscated. I recognize that those are extremes but, when you grow up in that environment, you become much more aware of problems with currency. So when I saw bitcoin, it was like a dream.”
It is true that Bitcoin is gaining a lot of traction in Argentina, where many citizens are increasingly losing faith in fiat and beginning to adopt the digital currency as a hedge against the freefalling Argentinean Peso. Thus, the current economic climate in the country could be a blessing in disguise as it may drive Argentina to become the hotbed for Bitcoin innovation in Latin America.
Alan Safahi, CEO of a cash-to-bitcoin service ZipZap, which operates in Latina America, recently supported these sentiments in an interview with Coindesk:
“We see a lot of pent-up demand for bitcoin in Argentina … people in the streets come up to you and try to convert your dollars into bitcoin. They say ‘cambio, cambio’; they know how to do currency conversion with bitcoin. Taxi drivers there know about bitcoin. I’ve never seen a country where people are so in tune with financial services as they are in Argentina.”
Indeed, a taxi cab service recently started accepting Bitcoin as payment. What’s more is that the demand for an alternative currency to the Argentinean peso is so high that Bitcoins have even entered mainstream commerce. Enbitcoins.com is a service that allows citizens to pay for utilities such as electricity, water, gas, cable TV and telephone.
Last year, a documentary film on Bitcoin in Argentina was released describing the deteriorating economic situation in the country. A year later and still no end in sight to the liquidity crisis as the country devalued the peso by another 20% at the beginning of the year. If this trend continues, it will certainly force people to overlook any government warnings and shun the peso in favor of cryptocurrencies as a means of staying afloat.
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