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Argentina Turns to Cryptocurrency as Inflation Soars 276%
Argentina has the highest rate of cryptocurrency adoption in the Western Hemisphere, according to a recent Forbes report.
Due to extremely high inflation that has lasted for decades and which has led to a significant devaluation of its national currency, the peso, Argentina has turned to alternative investments such as cryptocurrencies.
SimilarWeb data compiled by Forbes shows that 2.5 million visitors from Argentina accessed 55 of the world’s largest cryptocurrency exchanges, or about 1.92% of total visitors worldwide. Argentina also accounts for 6.9% of total visits to Binance, the largest cryptocurrency exchange by trading volume.
Cryptocurrencies for survival
Unlike the trend of investing in meme coins seen in major markets such as the US and UK, Argentines predominantly buy and hold stablecoins. like Tether (USDT).
Typically, people buy cryptocurrency to trade or use it for other purposes. They might buy Bitcoin hoping it will increase in value or use Ethereum to pay for something online. However, in Argentina, many people buy USDT and then choose not to do anything with it, said Maximiliano Hinz, head of Latin America at Bitget.
This trend in Argentina suggests that people are looking to hold USDT to store their wealth in something more stable, especially in the context of the country’s record inflation.
Argentina is struggling with extremely high inflation, with annual rates reaching nearly 300% in April 2024. The rate fell to 276% in May, the lowest since January 2022 and the fifth consecutive decline.
Despite some improvements, annual inflation in Argentina remains extremely high, above 275%. This stubborn inflation has weakened the country’s peso, which loses value as prices rise.
The Joys of Fiat Money
With the value of the peso continually eroding, people are losing confidence in this currency and looking for alternative ways to store their wealth.
The widespread adoption of cryptocurrencies in Argentina is also supported by the country’s leadership. President Javier Milei is a staunch supporter of cryptocurrencies, especially Bitcoin. He has made pro-crypto policies a key part of his agenda since he was elected president of Argentina in November last year.
Milei has recently advocated for free currency competition. He wants to give citizens the freedom to choose their preferred currency units, including Bitcoin, WTI, and BTU.
However, Milei has not gone so far as to make Bitcoin legal tender in Argentina, as El Salvador did under President Nayib Bukele. El Salvador is also the first country to legalize Bitcoin.
According to recent reports, high-level officials from regulators in both countries, including Argentina’s National Securities Commission (CNV) and El Salvador’s National Digital Resources Commission (CNAD), have held meetings to exchange views and explore potential collaborative arrangements.
Discussions focused on El Salvador’s pioneering experience in adopting Bitcoin as legal tender and Argentina’s efforts to learn from this experience to improve its cryptocurrency adoption and regulation strategies.
Control freaks
Despite Argentina’s openness to cryptocurrencies, the country has faced challenges in regulating the cryptocurrency industry. CNV has yet to register any major cryptocurrency exchanges, including Binance.
The lack of regulation has continued despite efforts to introduce registration requirements for cryptocurrency businesses in April 2024. Argentina still struggles to provide safe and regulated cryptocurrency services in the country.
New regulations surrounding Bitcoin have been criticized for needlessly requiring both companies and individuals involved in digital activities to register with the government.
However, Argentina is a promising market for Bitcoin and cryptocurrency adoption. As one of the fastest growing cryptocurrency markets, Argentina is ranked 13th in Chainalysis’ Global Crypto Adoption Index 2022.
Morning Consult reports that Argentines have more confidence in cryptocurrencies than people in other countries. This is likely due to Argentina’s high inflation, which has led to only 35% of Argentines believing that the peso will hold its value for the next 1-2 years.