The currency inflation in Argentina has led to the emergence of cryptocurrency in the market.

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Title: Translation Team of Asia-Africa-Latin America Web3 Research Institute

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Editor: vand

The currency inflation in Argentina has led to the entry of cryptocurrencies into the market

Latin America has become one of the fastest-growing regions for cryptocurrency users, and the lives of the people in Argentina are changing as a result.

Can you imagine an ordinary Argentine mother using cryptocurrency to shop for essential items for her family? Malaya Fetuccini, an ordinary housewife in Argentina, has been using USDC at METRO since 2022 and is very proficient at it.

At the end of each month, she opens the crypto app and meticulously checks this month's expenses, even recalling what she purchased and why she paid for it through timestamps: "Essential items, children's tuition fees…" Recording the family's expenses one by one also records the progress and changes in the blockchain industry.

All of this is happening in Argentina. According to Mastercard's statistics, at least 51% of Latin Americans use cryptocurrency for shopping. Moreover, the total inflow of cryptocurrency in Latin America exceeded $562 billion from 2021 to 2022, a 40% increase from 2020.

We can see how much imagination and opportunity globalized crypto assets can bring.

Currency inflation is pressure, but also an opportunity for cryptocurrency in Argentina

Central and South America have long struggled with currency inflation, especially in recent years, with inflation continually reaching new highs.

The currency inflation in Argentina has led to the entry of cryptocurrencies into the market

Image source: Instant Finance

In February, Argentina's inflation rate was 6.6%, with a cumulative inflation rate of 102.5% over the past 12 months, reaching the highest level in 30 years. The information hidden behind these data is that the price increases for clothing and shoes, restaurant and hotel consumption, and food and beverages in Argentina have all exceeded 100%, doubling! The reasons for this are economic recession, external debt, fiscal deficits…

But the people living here are not really concerned about how to solve inflation, but more about where everyone's "solution" lies?

Cryptocurrency may be a solution for the people of Argentina. Although Argentina's legal tender does not recognize any cryptocurrency and policies fluctuate, due to its decentralized and globalized nature, no one can truly prohibit the use of cryptocurrency, as evidenced by the volume of cryptocurrency usage in Argentina.

Cryptocurrency applications in Argentina

Survey data from Latin America shows that Argentina is one of the countries with the highest cryptocurrency adoption rates in the region.

For example, according to the American Market Intelligence (AMI), as of 2022, 27% of Argentine respondents "regularly" purchase cryptocurrencies, a 15% increase from 2021, and 98% of Argentines are aware of cryptocurrencies, with one-fifth of residents planning to purchase cryptocurrencies in the future.

The currency inflation in Argentina has led to the entry of cryptocurrencies into the market

Image source: web3plus

Argentina is one of the fastest-growing cryptocurrency markets. In fact, in a study of the 2022 global cryptocurrency adoption index, Argentina ranked 13th. Researchers at Chainalysis noted that the usage of stablecoins in Argentina is very high, as savvy Argentines seek to avoid local currency inflation.

A report from Morning Consult also indicates that Argentines trust cryptocurrency assets more than residents of other countries.

In a 2022 survey, about 60% of Argentine respondents said they "strongly" or "somewhat" believe that Bitcoin and other cryptocurrencies will perform well in the next 1-2 years, and most Argentines still consider the US dollar and gold to be safer long-term investments than BTC.

Globalized Crypto has become a solution for the people of Argentina

The Argentine fiat currency continues to set new inflation records. For decades, this Latin American country has struggled with double-digit inflation rates for the Argentine peso. The annual inflation rate for the peso increased from 10.46% in 2010 to 42.02% in 2020. The country's inflation rate rose to a staggering 94.8% in 2022.

Most Argentines believe that their legal tender will depreciate, with only 35% of Argentines believing that the peso will maintain its value in 1-2 years, the lowest confidence score among all surveyed countries. With such low confidence in their local currency, globalized cryptocurrencies have become a solution.

Before the widespread adoption of crypto in this country, Argentines had relied on the US dollar as an alternative to the peso. The Central Bank of Argentina (BCRA) indicated that the country's financial institutions and households had stored $230 billion in cash.

However, this has led to an excessive reliance on foreign exchange. The Argentine government has also tried to address this issue, such as introducing new taxes and exchange rates. According to Argentine regulations, residents are limited in purchasing dollars from banks. Starting in 2022, a 35% withholding tax was imposed on dollar transactions.

In order to maintain the value of its domestic currency, the Argentine government is also unwilling to support stablecoin pegged to the US dollar, but crypto is globally decentralized and cannot be prohibited.

Argentines have started to use cryptocurrencies such as Bitcoin, Ethereum (ETH), and stablecoins, making it easier, cheaper, and faster to transfer between fiat currencies and cryptocurrencies, and with no limits. It is worth mentioning that crypto also helps to reduce the risk of purchasing dollars on the black market.

In addition to inflation and new exchange rates, many Argentines are also concerned about their savings and checking accounts being frozen by banks. For example, the Argentine government strictly limited the use of bank accounts during an economic crisis called "Corralito." The impact of these strict measures is still fresh in the memory of Argentine citizens. AMI's survey also shows that 46% of Argentines purchase cryptocurrencies to "avoid government control."

What measures has the BCRA, which does not welcome the US dollar, taken regarding Crypto?

The Argentine government's position does not seem particularly firm, as laws regarding cryptocurrencies continue to change. Argentina does not accept BTC as legal tender, but it does not prohibit crypto like we do.

Argentina has not announced a comprehensive ban on this technology, but it does not fully support crypto. However, in 2022, the Argentine government announced the formation of a "National Blockchain Committee" to actively study cryptocurrency regulation in Argentina.

Interestingly, some cities and provinces in Argentina have already implemented policies to encourage the development of crypto. For example, the province of Mendoza announced that it will accept tax payments in stablecoins such as USDT. In 2022, the capital of Argentina, Buenos Aires, expressed its intention to tax crypto transactions. The Buenos Aires government also plans to operate validator nodes on the Ethereum 2.0 blockchain in 2023.

The province of San Luis has also strongly supported the adoption of crypto technology in recent years. They will allocate treasury funds as collateral for a new stablecoin pegged to the US dollar called "Activo Digital San Luis de Ahorro." They will also sponsor local artists with an upcoming NFT project.

Although Argentina's crypto policy is relatively lenient, the BCRA does not allow exchanges or banks to provide crypto services to customers. After Banco Galicia attempted to provide crypto trading services in 2022, BCRA members banned crypto transfers within traditional financial institutions.

Regulatory agencies in Argentina frequently issue warnings about high-risk crypto assets, particularly ICOs. However, Argentina does not have laws prohibiting licensed residents and companies from mining (PoW) cryptocurrencies.

How has cryptocurrency entered the daily lives of Argentines

While most Argentines purchase cryptocurrencies for investment purposes, it does not prevent them from using digital assets in their daily lives:

  • Store of value investment: According to AMI's survey data, over 50% of Argentines purchase crypto assets as a "hedge against inflation" similar to assets like gold. Whether Argentines are buying Bitcoin, Ethereum, or stablecoins, many believe they are more likely to retain value than the peso.
  • Remittances: World Bank data shows that Argentina receives approximately $650 million in remittances annually. Researchers at Chainalysis found that an increasing number of Latin American immigrants are using Bitcoin to remit money to their families in their home countries. Now, Argentines can access the Bitcoin Lightning Network on apps like Strike, and more Argentine immigrants are beginning to enjoy the benefits of cross-border cryptocurrency transactions.
  • Everyday shopping and taxes: More and more Argentine businesses and governments accept cryptocurrency as a valid form of payment. AMI's data shows that Argentina is an important market for crypto debit and credit cards. For example, Mastercard and Binance crypto exchange have jointly launched prepaid crypto debit cards nationwide.
  • DeFi activities: Nearly 25% of crypto transactions in Argentina occur on decentralized finance (DeFi) applications. Having entered the world of crypto, more Argentines are ready to try new services such as DEX (decentralized exchanges), staking pools, and crypto loans.

How do Argentines enter the world of Crypto

In fact, using exchange services on CEX has always been the most effective way. In Argentina, platforms such as Coinbase, Kraken, and Gemini provide crypto services to Argentine customers. With the growing demand for digital currencies, more crypto intermediaries are eager to provide services in Argentina, and Strike also announced its entry into the Argentine market in early 2022.

In addition, many people shop on peer-to-peer trading platforms, matching with individuals online in a manner similar to Xianyu, agreeing to terms, and trading directly. Although CEX and crypto apps are the most common ways for Argentines to purchase cryptocurrencies, there are also physical Bitcoin ATMs in Buenos Aires, the capital.

The currency inflation in Argentina has led to the entry of cryptocurrencies into the market

Image source: Sina Finance

Conclusion

The people of Argentina and other Latin American countries need cryptocurrency to solve various problems, and their enjoyment of the benefits of crypto has made them the most enthusiastic supporters of cryptocurrency, with more and more Argentines considering BTC, ETH, and stablecoins as a safer choice for long-term savings.

Furthermore, with increasing support from more businesses and provincial governments for stablecoin transactions, locals have more ways to use cryptocurrency, and perhaps one day, most Argentine businesses will use USDC to pay their employees.

Although it is still unclear how cryptocurrency will affect the future of Argentina, it is evident that digital assets will play an important role in the country's economy, and this will be visible in the next 3-5 years…

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