Distinguishing between fact and fiction in the Bitcoin craze.
Is the Bitcoin craze in Argentina authentic? Uncover the reasons behind its slow adoption and the obstacles standing in its way despite global excitement.
In the South American nation of Argentina, economic challenges have escalated to critical levels, highlighted by a staggering annual inflation rate of 276% as of March 12. With the Argentine peso losing its value rapidly, citizens are turning to alternative assets for stability. One such asset is Bitcoin (BTC), as per reports from Bloomberg.
Data from Bloomberg indicates that Bitcoin purchases on Lemon, the prominent retail crypto exchange in the country, have surged to nearly 20-month highs. Lemon recorded close to 35,000 transactions in the week ending March 10, doubling the average weekly volume seen in 2023. The surge in crypto activity is driven by citizens seeking to safeguard their wealth amidst a recession and skyrocketing inflation, worsened by President Javier Milei’s drastic economic policies.
Until February 2024, Argentina had the highest purchases and holdings of stablecoins in Latin America over the previous six months, as outlined in a report from Bitso, a Mexican-founded crypto exchange. Digital dollars, notably USDC and USDT, were preferred over other cryptocurrencies by almost five times. Argentinians allocated 60% of their total crypto purchases to these stablecoins, with only 13% going to Bitcoin.
This trend contrasts sharply with neighboring Colombia, where stablecoins accounted for just 31% of purchases. This raises the question of how crypto is reshaping Argentina’s economic landscape and whether the hype around Bitcoin is legitimate.
Since President Javier Milei took office in November 2023, Argentina has adopted a new approach towards crypto. Under the previous administration, crypto holders in Argentina enjoyed a fixed tax rate, but new regulations have been introduced under the Law of Foundations and Initial Measures for Argentinian Liberty. The new bill addresses taxation, including crypto holdings, with rates set to increase gradually.
Despite some welcoming these changes, critics argue that the crypto sector is being treated unfairly compared to previous tax rates. The government’s agreements with the IMF also pose challenges for crypto use in the country.
With inflation rates soaring, stablecoins like USDC and USDT have become popular for everyday transactions in Argentina. The demand for both Bitcoin and stablecoins has increased over time, with many opting to convert their funds into stablecoins to combat inflation and currency devaluation.
Despite reports of a surge in Bitcoin purchases, the overall adoption of Bitcoin in Argentina remains limited. Regulatory restrictions and practical challenges hinder daily transactions using Bitcoin, making it less feasible for everyday use compared to stablecoins.
The road ahead for Bitcoin adoption in Argentina remains uncertain, with regulations and economic conditions playing crucial roles in determining the country’s crypto future amidst ongoing economic turmoil.
