Tuesday, July 27, 2021

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    Bitcoin emerges as a possible alternative to the “official” currency in Argentina

    Diario Financiero – Santiago

    The growing popularity of bitcoin has fueled debate about its use in countries particularly affected by hyperinflation. In some cases, the solutions proposed take on almost opposite signs.

    In mid-April, just as the largest cryptocurrency was peaking at around $65,000, Turkish authorities decreed a ban on using bitcoin as a payment method, whether for goods or services. This veto extended to all existing cryptocurrencies and cryptoassets.

    The 16% inflation recorded by Turkey at the time of the announcement of the ban and the collapse experienced by its currency, the Turkish lira, had triggered the demand for bitcoins by its citizens as an alternative payment method to the lira.

    Turkey’s ban to protect its currency extended fears that other hyperinflation-stricken economies would follow in its footsteps. Three months later, far from shuffling a hard line similar to that of Turkey, Argentina is debating ‘officializing’ bitcoin as a method of collecting salaries.

    Deputy José Luis Ramón, head of the Federal Unit for Development party, one of the minority groups in the Chamber of Deputies, has presented this week a bill so that workers can choose the total or partial collection of their salaries in bitcoins. The measure would also mean that workers who provide services abroad, because cryptocurrencies are not considered foreign currencies, should not convert their income to Argentine pesos.

    The initiative aims to offer “a modern mechanism to preserve the purchasing power of their remuneration, in a country beset by the collapse of its currency, the Argentine peso, and by uncontrolled inflation, of 48.8% year-on-year last May.

    The project

    The bill presented in Argentina does not aspire to reach the dimension of the ‘institutionalization’ of bitcoin adopted in El Salvador, become a month ago the first country to approve bitcoin as a legal tender. But an eventual approval would mean a new endorsement of the cryptocurrency, immersed in a bump in its price much longer than usual in recent times.

    Hyperinflation and falls in the peso were already two of the most prominent economic junctures when Argentina became inspiration for the future creation of Coinbase, the largest cryptocurrency trading market in the United States, and that in its historic debut on Wall Street reached US$100,000 million in capitalization.

    Brian Armstrong, founder of Coinbase and considered by some specialists in the sector as the ‘Elon Musk of cryptocurrencies’, spent a season in Argentina after finishing his studies, and it was in this country where he saw the light with the world of cryptocurrencies. In his words, “it was an interesting experience to see the financial system of a country like Argentina, which had gone through hyperinflation”, and that was where he discovered that the transactional nature of these digital currencies, emerging at the time, allowed them to be safe from national crises such as the one registered in Argentina and from shocks such as those suffered by the Argentine peso.

    The low representation in the Chamber of Deputies of the party promoting the bill to be able to collect salaries in bitcoins makes it difficult for the initiative to go ahead. However, its processing puts the focus back on the debate on what line the economies most affected by hyperinflation take on cryptocurrencies.

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