Why can Milei bring hope to Bitcoin?
Author: RAÚL VELÁSQUEZ, Bitcoin Magazine
Translator: Qin Jin, Carbon Value
On December 10th, Argentina's new president Milei was sworn in in the capital Buenos Aires, officially beginning a 4-year term. The new government of Argentina also took office on the same day.
Some media, content creators, and social media users who are interested in Bitcoin continue to repeat the words: Javier Milei, the candidate who supports Bitcoin. Javier Milei, the presidential candidate who supports Bitcoin. It is inspiring that the new president of Argentina will formulate new policies favorable to the development of the ecosystem, and Argentina has long been one of the countries in the region with the highest adoption of Bitcoin. But why?
On July 26, 2016, Milei first appeared on the late-night Argentine TV show "Animales Sueltos," hosted by his current friend, journalist and TV show host Alejandro Fantino. In the show, Milei's appearance, disheveled hair, outspoken behavior, and most importantly, his advocacy of classical liberal thought, quickly made him popular in the domestic media and firmly established his position. Shortly thereafter, Milei's passionate speeches began to go viral on the internet.
For many years, Milei has been engaged in writing and speaking about Austrian economics, but it was television that laid the foundation for his rapid rise in politics. As Milei became increasingly popular, Bitcoin itself also gained more attention in Argentina and throughout Latin America. For many Bitcoin users in the region, their "rabbit hole" journey (rabbit hole metaphorically referring to a complex, strange, or unknown state or scenario), and their understanding of our failing monetary system, may partly come from the influence of Milei's remarks.
As early as 2017, Milei mentioned the potential of Bitcoin, with most of his remarks praising the technology's ability to reclaim monetary sovereignty from central banks, which is not surprising. However, in 2019, Milei admitted that he had not yet delved deeply into Bitcoin. Despite calling Bitcoin an "unassailable concept" in 2021, other interviews from last year indicated that the Argentine president is still in the process of fully understanding Bitcoin.
Given that Milei's views on currency, central banks, taxation, government roles, and many other aspects of economics and politics perfectly align with the spirit of Bitcoin, it is not surprising that the community has taken a liking to his eccentric behavior as he gradually approaches the world stage.
In many ways, Milei's Bitcoin journey seems very close to life, but still incomplete. However, unlike most people, his ascension to the presidency means that he now has a more complex mission: to rescue Argentina from the vortex of malignant hyperinflation.
Argentina's Issues
In the week before the Argentine general election, the annual inflation rate in Argentina reached 142.7%, and the economy continued to suffer the severe consequences of the policies that Milei has been condemning for many years. It is this that has prompted Argentinians to yearn for change, ultimately leading to Milei's victory in the election on November 19. On that night, Milei stated that his goal is not only to solve the current problems, but also to put Argentina back on track to become a world power destined for the early 20th century.
Since taking office, Milei has coined the term "No hay plata" (there is no money) to describe Argentina's current fiscal deficit situation. In addition to approving the closure of the central bank's commitments, reducing public spending is also one of the key points of Milei's new government. Milei believes that failure to do so will inevitably lead to malignant hyperinflation.
In addition, Argentina and Milei must also address the enormous debt owed to the International Monetary Fund, which has exceeded $31 billion at the time of writing this article. Although Milei has pledged that Argentina will repay the debt, many point out that the IMF's warning to El Salvador is one of the reasons why Argentina is unlikely to accept Bitcoin soon.
This speculation stems from a non-binding letter of intent sent by former Economy Minister Martin Guzmán to the International Monetary Fund in March 2022, outlining Argentina's plans to "prevent the use of cryptocurrencies" by implementing stricter anti-money laundering measures. While banks are strictly prohibited from dealing with any cryptocurrencies, this has not stopped the use of cryptocurrencies, especially the US dollar-pegged stablecoin (USDt), which has become one of the preferred options for escaping the devaluation of the Argentine peso due to its ease of use and accessibility.
Another prominent policy of Milei's government, dollarization, seems to contradict the idea of super Bitcoinization, but it is undoubtedly a necessary step to start repairing the Argentine economy. At the LABITCONF conference, the incoming Prime Minister Diana Mondino stated that in addition to dollarization, the Milei government is also keen on abolishing mandatory legal tender, allowing people to choose their own currency. In numerical terms, many Argentinians already prefer the local stablecoin "Criptodólares."
During the campaign and preparation for taking office, Milei has stated that the impact of the previous government's policies and spending may become apparent in the 18-24 months after he takes office. While such unpopular remarks would cost thousands of votes for others, for Milei, it is an extension of the principles he followed during the campaign (low time preference), which is the reason why the Bitcoin community initially rallied behind him.
Views of Bitcoin Players
Milei's "chainsaw plan" will take time, but fortunately, many Bitcoin players understand that if Argentina is to push for greater adoption of Bitcoin, it will also need to be a gradual process. JAN3 CEO Samson Mow has always said, "Milei's top priority should be to stabilize inflation, move towards dollarization, and ultimately close the central bank." Only then will the government consider what Bitcoin can do for the country.
Nevertheless, Argentine Bitcoin players seem generally excited about the broader prospects of Milei's victory. For Manu Ferrari, Milei's commitment to freedom "will be more than enough in the coming years," a sentiment shared by most people familiar with the intricate economic functions of Argentina.
When El Salvador passed the "Bitcoin Law," this Central American country set the first precedent for a nation adopting Bitcoin. However, limiting the application of Bitcoin to just this is at best short-sighted. If the goal of Milei's government is the free circulation of competitive currencies, then the policy may already be beneficial for Bitcoin after years of mandatory currency controls.
A more comprehensive national strategy, including the abolition of capital gains tax, research into Bitcoin mining, and even considering the sale of Bitcoin-backed securities, is only feasible if Milei manages to correct the direction of the Argentine economy. Meanwhile, the only commitment to freedom should gradually disappear as Argentina accepts more free market policies.
The new government's primary goal at present is to stop the bleeding, with shock measures aimed at addressing the "No hay plata" problem. Currently, Milei's government still needs to control inflation, plan the dollarization process, and develop a plan to close the central bank. In this country, Mauricio Macri is the only president to complete his term outside of the leftist Peronist ideology.
The rise of Bitcoin as a true asset class has mainly taken place in a laissez-faire environment, as regulation is still struggling to keep up with Bitcoin's development. Milei's government promises to reduce the numerous taxes that plague Argentina's daily economy, at least, this is what people can look forward to.
The JAN3 team hopes to engage with Milei and his allies on the issue of Bitcoin in 2024. By then, the world should have a clearer picture of what his vision for Argentina looks like.
In the meantime, Bitcoin players can rest assured that this freedom-loving politician will see Bitcoin as the second coming of private money, and he has all the necessary tools to fully understand the significance of Bitcoin and ultimately ensure that Argentina adopts Bitcoin for long-term benefits.
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