Could Bitcoin Displace National Currency in Argentina?

April 30, 2015Currenciesby EW News Desk Team

0

In recent years, Argentina has come to be known for its highly volatile currency values and myriad problems with its banks. As a result, many in Argentina find themselves wishing for a more stable and secure currency and banking system.

Bitcoin is a form of "digital currency" (or "cryptocurrency," as some call it, due to its encrypted, highly secure nature). Often synonymous with illegal dealings in the United States, thanks in large part to illicit websites like The Silk Road, Bitcoin has only just begun to make an impression on the American consumer.

However, some analysts believe that Argentina is the perfect place for Bitcoin to grow into its own as a currency. The country experiences constant, near crippling inflation (and sometimes hyperinflation) that has led to defaults on national debts and currency revaluations. Due to the Argentine public's general distrust of institutional banking, less than half of the population use Argentine banks or credit cards. Many opt to either keep their money in foreign banks. However, government regulations place significant fees on money received from abroad, making these investments in foreign banks relatively expensive and impractical for most.

Unlike fiat currency issued by foreign governments, Argentina's laws allow Bitcoin transactions to circumvent government restrictions related to the receipt of money from abroad. As a result, many hotels, tour groups, and other businesses with significant numbers of foreign customers have embraced the new currency – and the potential savings it represents to their businesses and their customers.

Bitcoin first appeared in 2009, but has had quite a volatile existence. The digital currency has fluctuated in price quite wildly over its six years of existence, bouncing between $70 and $1,200 per coin over the last two years alone. A few American companies have begun accepting Bitcoin, but so far, there has been little economic incentive for American consumers to switch to this form of currency. Yet, in Argentina, with its bank instability and fees on foreign funds, consumers have found Bitcoin an ideal solution that provides them with most of the luxuries of digital banking experienced by those in the most successful and industrialized nations of the world. Thus, Argentina is one of the few places in the world where people can actually use Bitcoin on a regular basis for ordinary, daily transactions in the real world.

While the value of Bitcoin has slowly been declining in the US and Europe, the opposite is true in Argentina. While a long way from replacing the Argentine Peso, Bitcoin has gained a strong foothold in the South American country. Thus, Argentina, and not the US or Europe, may be where the digital currency truly comes into its own and evolves into a substantial, widely accepted, and stable medium for conducting financial transactions.