How Argentina’s economy struggled while its crypto ecosystem flourished

The year 2020 will go down in history as the beginning of the COVID-19 pandemic and its impact on the Argentine economy. However, it is also true that Argentina has been plagued by economic problems for decades: high tax burden, devaluation of the national currency (the Argentine peso), restrictions on foreign currency purchases, etc.

There have also been developments related to attempts to regulate the cryptocurrency ecosystem, in addition to those related to private companies and cryptocurrency adoption. Below is a summary of the events of the past year and the opinions of several people who have lived this experience from inside the ecosystem.

first quarter 2020

Second quarter 2020

third quarter 2020

  • According to a survey by Paxful, Argentines believe that investing in cryptocurrencies is the most effective way to save money.

fourth quarter 2020

Attempts to regulate

In Argentina, there have been two initiatives at the national level and one at the provincial level (in the province of Misiones) related to attempts to regulate cryptocurrencies.

A bill was formally introduced in the Chamber of Deputies and signed by 15 deputies. This initiative, submitted in 6055-D-2020, has its own short title: An integrated regulatory framework applicable to civil and commercial transactions in crypto assets.

On the other hand, on the opposition side, Argentine Congressman Ignacio Torres of the Front Together for Change also has a crypto currency bill in hand, but it has not yet been officially submitted to Congress. This legislator, representing Chubut district, is organizing a series of meetings and consultations on the issue with different sectors.

These projects have also been the subject of controversy and criticism from various sectors of the Argentine cryptosphere.

In the province of Misiones, the provincial delegate of the Front for the Renewal of Consent, Roque Gervasoni, also submitted the project to the Chamber of Deputies. Bill D-55787/20 also theoretically seeks to regulate the cryptocurrency ecosystem. Another feature of this initiative is the creation of a stock exchange.

Rodolfo Andragnes, president of Bitcoin Argentina, said:

In November, the National Crypto Assets Bill, which we were highly critical of, was a hotly debated topic.

Pedro Rey Puma, OKEx community manager for Latin America, notes: We need to pay attention to the two bills that have been introduced in the IFJ and in Congress, even though I think they need to be amended, and I support the general dissatisfaction of the public.

I also think that the legitimization of cryptocurrencies by the authorities is positive, because if there are favorable regulations, it will be a huge opportunity for the country to be at the forefront of innovation and the creation of services based on this technology. Otherwise, these activities are classified as informal.

The price of bitcoins has risen and their use has increased.

It has been a very interesting year in terms of bitcoin (BTC) prices, especially in the last two weeks. Bitcoin hit a new all-time high, something that hasn’t happened since 2017. It should also be remembered that there has been a further halving this year, which many believe has had a decisive impact on the price.

Andragnes said new projects have emerged in Argentina in 2020, while others have been consolidated. He pointed out that not only were the exchanges growing exponentially in users, three to five times their volume, but also the companies that offered services, such as digital certification or blockchain development, were growing.

Ivan Tello, co-founder of Decrypto, stated that the most important thing in 2020 in the crypto-ecosystem is adoption :

COVID and quarantine have taught us that everything is virtual. Shopping at the supermarket or the mall has become virtual. Transactions and even birthdays were virtual, but so were savings, investments and money.

On the other hand, he found that before the fall and ban on buying dollars in Argentina, traditional investors and custodians could continue to buy virtual dollars in the form of stablecoins, which in many cases are the gateway to the world of cryptocurrency. Then they will discover all the solutions that this new world has in store for them, he noted. More and more people are losing their fear of the virtual, the intangible.

But he also pointed to the halving of bitcoin (emissions reduction) and said: This happened in a year where all the central banks were spending and counterfeiting their coins without any support, and it revealed the cracks in the system and how the perfect storm is only helping bitcoin rise further in price.

According to Gabriel Vago, CEO of ArgenBTC, 2020 may have been the best year for the crypto ecosystem in Argentina. The various circumstances that have occurred throughout the year – between the collapse of the exchange rate, the quarantine freeze and the inexorable rise in the price of bitcoin since March – have created the perfect scenario for hundreds of thousands of Argentines to join the crypto world, he stressed.

According to Emiliano Limia, public relations manager at Buenbit, the most important thing is the exponential growth of the number of users. The reasons for this overall growth are mainly related to the complex economic context in which the country finds itself. Given the devaluation of the Argentine peso and restrictions on foreign currency purchases, crypto assets have emerged as a form of savings.

In particular, he explained that Dai’s adoption has become popular: Since it is a stable paper priced at the US dollar, many Argentines have decided to buy it. This is because Argentina offers a maximum rate of up to $200 per month, combined with low interest rates in Argentine pesos and Argentines’ historical preference for the dollar. For new users, the DAI is therefore a good entry into the ecosystem. MakerDAO, the organization behind Stablecoin, even claims in its official blog that DAI has become the most popular crypto currency in Argentina in terms of trading volume, even surpassing Bitcoin, due to concerns about hyperinflation.

On the other hand, he talked about raising the price of bitcoin. It has caught the attention of the press and of many people who are not yet part of the ecosystem and who are now noticing that assets are consolidating, he said.

For economist Nicholas Litvinov, director of Estudinero, the most important developments in 2020 were about two things: operations and access.

At a fundamental level, the fact that bitcoins are now so easy to buy was great news, he said. The access pandemic benefited from the development and execution of P2P transactions, but these were controlled and guaranteed by exchanges or multi-currency platforms. The offerings of Airtm, Uphold and now Binance – that an Argentine can buy Bitcoin, Ethereum or other assets with a peso transfer and send another person crypto – is an operational model that facilitates access to crypto assets. Peer-to-peer opens the door to millions of people in the world of crypto assets.

He added: From a pricing perspective, the consolidation of bitcoin as an inflation hedge and the ability to access dollar-denominated stablecoin as an inflation hedge is good news. In addition to rising prices, bitcoin has proven to be a great safe haven for stocks, especially for countries with a lot of financial repression or regulation, like ours.

For Matthias Part, COO of Crypto Rocket and CR Academy, a number of internal and external factors have helped put cryptocurrencies on the map for good.

When the previous government settled the fall of the exchange rate in September 2019, there was a lot of uncertainty, which was immediately removed by the ecosystem, he said. DAI is already listed on local exchanges and the (misnamed) cryptodollar has appeared.

When, with the change of government, the economic crisis worsened, people wanted to make a living as much as possible by buying IADs without restriction and with Argentine pesos.

Ray Puma observed: I think one of the biggest things is the increased adoption of Bitcoin, DAI and USDT because of the overall growth in digital payments due to the pandemic.

Many have opted for traditional mobile peso wallets, while others are using cryptocurrency wallets or currency storage apps for the first time, he added.

For Rey Puma, another important development was that the public was more exposed to the fact that bitcoin could be an alternative to the peso or the dollar to maintain value, as bitcoin went from P1 million to P3 million in just a few months.

This has led to a strong increase in the number of new users and OKEX has noticed this as well. Rey Puma confirmed that Argentina has become one of the countries with the largest movement in Latin America.

For Marcos Zocaro, tax advisor, while these events (or actions) have not been good for the direction of the Argentine economy, increasing foreign exchange restrictions and the devaluation of the national currency have spurred the adoption of cryptocurrencies like we have never seen before.

New users and investors have entered the cryptocurrency ecosystem, discovered the technology and are trying to find a way to dollarize their savings while circumventing existing (legal) restrictions, he added. And this boom has also given rise to new local cryptocurrency companies and the emergence of major players (including major exchanges around the world).

Bitcoin halved

In addition to covering many global events, bitcoin cryptocurrency maker Abraham Kobos has talked about bitcoin halving: On the eleventh. In May, for the third time in its history, pay for each quarter worked was cut in half. This figure dropped from 12.5 to 6.25 bitcoins per processed block (every 10 minutes). When bitcoin first appeared in 2009, the yield per block was 50 BTC, then it gradually halved every 210,000 blocks for four years, reaching 25 BTC in 2012 and 12.5 BTC in 2016.

The halving phenomenon is a reminder that bitcoin is an extremely scarce commodity and its supply is becoming increasingly limited, he said.

Decentralised financing

Decentralized financing is an international phenomenon, and in Argentina, too, there are different dynamics and developments in this particular sector.

For Juan Manuel Dominguez, director of STO Managers, 2020 was as chaotic as it was interesting for the crypto-ecosystem: A growing interest from people not directly involved in the sector, ordinary people who hear about it from a friend or family member and finally decide to take the first step, at an even higher rate than in 2017.

In this regard, he pointed to the continuous development of new applications with a more user-friendly interface, particularly due to the strong growth of deFi platforms that have emerged this year. This plays an important role in facilitating adoption by users new to the industry, he said.

The section reads as follows: After the first quarter came the DeFi boom with yields of 5-8% per year, which eventually discouraged CFIs and fixed income bonds.

On the other hand, he also noted that the price of BTC has crossed a new all-time high:

I think we also need to recognize and share the great work of the community that we realized this year to educate the public and consider hosting webinars and ATF events. Clearly, this is a crucial year in every sense of the word.

Crypto Valley

For Alan Borishansky, CFO of Lemon Cash, one of the most important milestones in the Argentine ecosystem was the establishment of what he calls the first Crypto LATAM Valley in San Martin de los Andes, in the province of Neuquén. It has become a pioneer city that serves as a technology testing ground for companies, start-ups, entrepreneurs, scientists and organizations, he explained.

With over 600 merchants accepting digital assets as payment, Crypto Valley has a direct relationship with the city’s Chamber of Commerce and Industry and is supported by the local tourism department, he added. It also promotes financial inclusion through webinar series and research agreements with various universities across the country. Crypto Valley summarizes many of the changes in 2020 as a result of the pandemic, currency trap and tax increases that forced the mass adoption of cryptocurrencies as stores of value.

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