Argentina has been one of the most effervescent places for the cryptocurrency universe, with a routine use as a means of payment by the population at greater levels than in other countries, where assets are still seen as a store of value or investment. The local government understood the phenomenon and started to move before it is too late. When Argentina’s largest private bank announced that it was offering crypto buying and selling, the Central Bank soon stepped in and banned it. Shortly thereafter, the Argentine Senate passed a Bill that will allow the government to collect taxes on cryptocurrencies held by Argentine citizens abroad and which have not been reported to the country’s Revenue Service (AFIP). The tax amounts will be used to create a national fund, whose objective is to pay off State debts with the IMF, the International Monetary Fund. In the end, Argentina’s history of the past two decades can be punctuated by its blistering monetary policy. The population has been trying to dollarize itself and put the Peso aside for some time, as pointed out by tax consultant and cryptocurrency specialist Marcos Zocaro in an interview with Portal do Bitcoin. “In Argentina, there are many restrictions on foreign exchange trading, so people cannot buy the currencies they want to save in dollars. This also gave a boost to the purchase of cryptocurrencies as an alternative to protect themselves from the loss of purchasing power of the Peso”, says Zocaro, who is a member of the board of directors of the NGO Bitcoin Argentina. Zocaro explains that the use of cryptocurrencies as a means of payment in Argentina had two main impulses: one is the aforementioned difficulty in buying dollars and the other is the high and persistent inflation in the country. According to a report by Exame magazine, the average annual inflation reached 55.1% in a measurement made in March. It was a leap not seen since 2002, when the country famously defaulted on the IMF. But there is a factor specific to the local crypto landscape. “Many companies have created prepaid cards that are accepted even in small stores and for which people spend in pesos and receive a small cache back in crypto,” he explains.
State tries to maintain control
Regarding the Central Bank’s decision to react so quickly and ban banks from offering cryptocurrency trading, Zocaro directly states that it is a macroeconomic fear. “The main monetary authority is concerned about the rapid adoption of cryptocurrencies in Argentina because it fears that these purchases will generate an outflow of foreign currencies so large that it puts even more pressure on the devaluation of the Argentine peso. They also fear that the greater the use of crypto, the less control the Central Bank will have over the population’s transactions.” One of the big names in the crypto world in Argentina is the company Ripio. The company, which defines itself as a wallet and not a broker, was created in 2013, has hundreds of employees and has expanded its operations to other Latin American countries – especially Brazil. Henrique Teixeira, global head of business development, analyzed the moment of impasse between the government and the crypto ecosystem for the Bitcoin Portal. The executive recalls that purchases of dollars were made very difficult by the Cristina Kirchner government between 2011 and 2015 with the so-called “cepo”, as the restrictions became known. After a period of openness in the Mauricio Macri government, restrictions returned with the Alberto Fernández government in 2019 and the limit of dollars per citizen has plummeted to currently reach US$ 200 per month. “With these restrictions, stablecoins have gained a lot of traction. Tether, DAI and USDC are the most used”, explains Teixeira. For the entrepreneur, the most developed economies are the opposite of Argentina, having free exchange of currencies. In his view, the State tries to maintain control by force, but the result of this does not favor society. “The Argentine government is trying to hold on to some value of the currency [peso] with these restrictions. But I believe that creating these difficulties does not solve the problem. It just gets worse. Because Argentines are not going to stop buying crypto. They will find some way to buy it and not continue to have their heritage deteriorated,” he says.
Bitcoin Mining in Argentina
Another specific aspect is that Argentina has a relevant Bitcoin mining sector. The operations are set up in the south of the country, where the climate is cold and favorable for the machines to work. In May of this year, the British company FMI Minecraft Mining LTD — whose CEO is the Brazilian John Blount — announced the installation of an operation in Patagonia, with an investment of US$ 45 million, according to a report by TV Globo. But in January of this year the government imposed a 170% increase in the electricity bill in a region that is home to a large mining company, BitPatagonia. And so cryptocurrency mining companies operating in Argentina are already feeling a triple-digit increase in electricity. According to the Coindesk portal, the company, which is based in Tierra del Fuego, a province in the extreme south of Argentina, saw an increase of about 400% in one of its last energy bills. The region, where the climate is cold, is home to 22 cryptocurrency mining companies. Asked if he thinks Argentina can play a relevant role in mining, Zocaro says that the country already occupies a prominent position in this field. “Argentina already occupies a prominent place in terms of mining. There is a lot of activity,” he says. He also recalls that there are regions of the country where the activity has tax exemptions, which has given impetus to rigs.
Bitcoin Argentina is a non-profit organization that has been operating since 2013 promoting and disseminating technologies from the crypto world. The entity holds lectures, conferences, courses and provides legal and tax advice for the sector.