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Good news for cryptos from Argentina

There is good news coming out of Argentina for the crypto markets. 

In fact, it appears that the country may be following a similar path to El Salvador. 

The path of El Salvador

El Salvador is a poor country that has historically always been poor. Its history is therefore different from that of Argentina, which was anything but a poor country until about a century ago. 

But both have had problems with their national currency. 

The Republic of El Salvador was founded in 1841, almost two centuries ago, and until 2000 had the Salvadoran Colón (SVC) as its national currency. 

On 1 January 2001, however, the US dollar was effectively declared the national currency, with the exchange rate of the colon set at USD 1 = SVC 8.75, and within a few months the Salvadoran national currency had ceased to circulate in the country. It was replaced by the US dollar in a process known as dollarisation. 

Twenty years later, in 2021, bitcoin was also declared legal tender, and so formally El Salvador now has three currencies: the colon, a national currency that is no longer in circulation, the US dollar and BTC. 

It should be noted, however, that the introduction of Bitcoin has not affected dollarisation at all, as the dollar remains by far the most widely used currency. 

When the colon was created in 1892, it was worth $2, but with subsequent economic crises and central bank mismanagement, it gradually lost value. 

By 2001, its value had fallen to $0.114, a loss of 94% in just over a hundred years, compared with a dollar that had lost 96% of its purchasing power over the same period. 

In other words, the purchasing power of the colon has virtually evaporated over the decades.

Crypto news: the situation in Argentina

Argentina has its own national currency, the Peso (ARS), which is experiencing something similar to the Salvadoran Colon. 

It was actually created in 1881 from the Spanish peso under the name Peso Nacional and has been devalued over the decades. 

In 1970 the peso ley (ARL) was introduced, worth 100 pesos nacional, while in 1983 the Argentine peso (ARP) was introduced, worth 10000 ARL. 

In 1992, the current New Peso (ARS), convertible into dollars, was introduced. At that time, 1 ARS was equal to 1 USD. 

Today, however, 1 ARS has fallen to $0.0029, a 99% loss in dollar value in just 30 years. 

Given this troubled history of economic crises and mismanagement of the currency by the central bank, it is not surprising that Argentina is considering dollarisation. 

The idea seems to be basically the same as in El Salvador, i.e. to make the Argentine peso disappear, effectively replacing it with the US dollar and making it the country’s legal tender. 

The possible new President

On 22 October, the first round of the presidential election will take place in Argentina. 

Leading the polls is Javier Milei, who has already said that if he wins, he will proceed with dollarisation. Moreover, the Argentine peso is in such a weak state that any other candidate who wins the election could also implement dollarisation. 

However, Milei is also a supporter of bitcoin

Therefore, if he wins, as recent polls seem to indicate, Argentina could not only abandon its national currency and proceed with dollarisation, but may even end up following El Salvador’s lead and make bitcoin its legal tender. 

It should be noted that Argentina has a population of almost 46 million, compared to just 6.5 million in El Salvador. 

Moreover, Argentina’s GDP is 26 times higher than El Salvador’s, as it is also significantly less poor on average. 

Suffice it to say that El Salvador’s GDP per capita is still only $3,800 a year, while Argentina’s is $13,600. 

This does not put it on the list of rich countries, but it is certainly at a much higher level than El Salvador.

The latest interesting news from Argentina: the impact on crypto markets

However, these figures show that the actual impact on the crypto markets could be modest. 

However, even the hypothetical news of bitcoin becoming legal tender in Argentina could have a significant impact. It would be a temporary impact, and perhaps not even a particularly large one, but it could act as a trailblazer for other states in similar situations. 

Currently, apart from El Salvador, only the Central African Republic has declared bitcoin legal tender, but there are also large states, such as Turkey, where the national currency is under severe pressure. 

There are also some, such as Venezuela, where the national currency is following a similar fate to the Argentine peso or the Salvadoran colon. 

Much will be known in October if Milei wins. On the other hand, it will probably be a long time before Argentina can take the next step after dollarisation, namely the possible adoption of bitcoin as legal tender.

Marco Cavicchioli
Marco Cavicchioli
Born in 1975, Marco has been the first to talk about Bitcoin on YouTube in Italy. He founded ilBitcoin.news and the Facebook group" Bitcoin Italia (open and without scam) ".