Cryptocurrencies have existed for just under two decades, and their use has been the subject of studies and research in economics, especially over the past decade. The fact that they are digital assets and that their use is not controlled by any central bank caused many people to distrust cryptocurrencies.
Despite the initial distrust, over time some people began to see these assets as a way to escape the political uncertainties of countries that cannot maintain efficient economic policies. Argentina was one such country. Mired in economic problems and crises, the country saw its currency depreciate brutally in recent years.
Argentina's economic crisis reached a critical point in its history in recent years. Our neighbors faced a challenging situation due to the depreciation of the peso and rising inflation. All these problems led people to develop a certain "lack of faith" in the country's financial and political system. And the solution some of them found was to acquire cryptocurrencies.
Millions Using Cryptocurrencies in the Country?
Although it is difficult to measure this phenomenon accurately, since it involves unregulated and decentralized activities and there is therefore no centralized entity to collect data, there are clear signs that many Argentines are adopting cryptocurrencies. One evident initial sign is that, in large cities such as Buenos Aires, people are increasingly willing and receptive to undergoing processes that exchange certain services for cryptocurrencies, as reported by Globo.
According to the newspaper, there are reports that Argentines were seen lining up to have their irises scanned in exchange for cryptocurrencies through an advanced service related to digital currency.
In addition, in 2023 the country ranked 15th in the Global Cryptocurrency Adoption Index, prepared by the American company Chainalysis, which analyzes the industry based on the transaction volume reported by different service providers. The index showed that Argentina stood out as Latin America's second-largest market, just behind Brazil, which has almost five times as many inhabitants overall.
Moreover, according to the virtual currency trading platform Lemon, approximately four out of every ten people who downloaded at least one cryptocurrency app in Latin America in 2023 were Argentine. This Argentine company, along with Binance, the global leader in digital currency platforms, dominates the local market. It is estimated that around three million people use cryptocurrency platforms in the country. This would put investments in crypto assets at a level nearly equal to that of the conventional capital market.
Fighting Money Laundering and Terrorist Financing
Another indication of cryptocurrencies' rising popularity in Argentina was the launch, in late March, of the Registry of Virtual Asset Service Providers, established by the National Securities Commission (CNV). The registry was created through legislation in accordance with the guidelines of the Financial Action Task Force (FATF), with the aim of combating money laundering and terrorist financing.
The registry's purpose is to identify providers, whether individuals or legal entities. They now all have a legal responsibility to report transactions considered suspicious to the Financial Information Unit (UIF), in an attempt to reduce the amount of fraud involving digital assets.
The registry was established to prevent Argentina from being included on the "gray list" of countries at high risk of money laundering, which could hinder the country's chances of renegotiating its external financing.
Despite the Crisis of Recent Years, the Argentine Peso Shows Slight Improvement
Even after the depreciation its currency suffered in recent years, Argentina expects better results in the future. This is due to the Argentine peso's latest performance. Over the past three months, the country's currency recorded a significant 25% rise against the dollar on the parallel market, establishing itself as the best-performing currency among the 148 monitored by Bloomberg.
The American agency attributes the peso's recovery, which is beginning to show concrete signs of stabilization, to the efforts of President Milei, who took office just four months ago, aimed at reducing public spending and controlling inflation in Argentina.
The peso's appreciation under Milei, although positive, raises uncertainties, because his spending cuts have also plunged the economy into a recession. Analysts warn that as unemployment rises, political pressure on Milei to ease the spending cuts will also grow. In addition, the president had to resort to provisional measures to reduce the budget because of the resistance his reform package faced in Congress. This highlights the limited political support for his economic plan.
