Argentina’s President Alberto Fernandez recently hinted that the country is open to the idea of adopting the world’s largest cryptocurrency, Bitcoin, and introducing a Central Bank Digital Currency issued by the central bank.
Fascinated by the initiatives in favour of the crypto world, such as the recognition of Bitcoin as legal tender in El Salvador or the issuance of the country’s first batch of its CBDC by the Bank of Jamaica, President Fernandez supports modern digital assets by trying to bring innovation to Argentina.
During an interview with a local media, he was optimistic about the use of cryptocurrencies, adding also that there is no reason to slow down or reject the evolution of the emerging class of digital assets.
He also added that the inflationary effect in the South American country could be nullified thanks to the benefits gained from cryptocurrencies.
Inflation is one of the most sensitive issues in Argentine politics. Fernandez inherited the world’s second most “miserable” economy, according to Bloomberg’s World Misery Index, from former president and businessman Mauricio Macri.
According to the country’s official inflation statistics, Mex$ 100 at the start of Macri’s term would be equivalent to Mex$ 661 today.
Not only that, the data suggests that prices in general have increased by 25.3% in the first half of 2021 alone.
Bitcoin and a CBDC for Argentina
Despite Argentina’s strict currency controls, the current president has a broader, more modern, digital vision. Indeed, he noted the growing perception of Bitcoin as a hedge against inflation in the wider global economy.
However, highlighting concerns about Bitcoin’s price volatility, he said cryptocurrencies are a social-economic issue that should be approached with a good deal of caution.
While there is an openness on the part of the president to explore digital resources, the head of Argentina’s central bank, Miguel Pesce, appears to be threatening a crackdown on the sector.
On 10 August, during the Digital Finance Forum organized by the Argentine Institute of Finance Executives (IAEF), Pesce hinted at some sort of regulation coming for bitcoin transactions and also stressed that the central bank was working to find effective ways to warn novice investors of the dangers behind cryptocurrencies.
For Pesce, bitcoin is not a financial asset because it is not backed by any assets and cannot guarantee a stable return, further believing that there could be a very unfair effect if this money from cryptocurrencies mixed with the traditional foreign exchange market.
Pesce also rejected President Fernandez’s suggestion to adopt a Central Bank Digital Currency (CBDC).
The aim of the central bank is to prevent untrained or uninformed investors from engaging in cryptocurrencies, through precise regulation.
The president of the Banco Central de la República Argentina (BCRA) on this very subject said:
“We are concerned that (cryptocurrencies) are used to generate undue profits on unsuspecting people”.
Interest in cryptocurrencies has increased significantly in Argentina in recent years, mainly because they can be used as indirect exposure to the US dollar, which protects investors in the country from the devaluation of the local currency, the Argentine peso.
Besides bitcoin, even stablecoins such as DAI are popular among Argentine traders.