- By Christine Ro
- Buenos Aires
In Argentina, there are traces of mistrust, even trauma, associated with the economy everywhere.
For Jerónimo Ferrer, one of the most vivid memories is of the financial crisis that hit Argentina in the late 1990s, when bank accounts were frozen and people’s savings evaporated almost overnight.
He’s not the only one who remembers. An engineering student I spoke to keeps all his savings, in US dollars, at home because he fears the banks will devalue their assets overnight.
A matter of trust
While many Argentines are forced to be experts on the state of the economy — from the dizzying levels of inflation to the current unofficial exchange rate between the peso and the US dollar — Ferrer went further than most of them.
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Since 2019, he has been launching the walking tours called “Our crazy tour of the local economy and bitcoin in Buenos Aires”, in which he explains to tourists the restrictions Argentines face, such as the limits imposed on online transactions. or the prohibition of payment by installments for international flights.
He also gives an introduction to cryptocurrencies, in particular bitcoin, and explains why he believes it is a valid alternative to the volatile and highly controlled Argentine peso.
“When you have limitations, you need tools for freedom,” Ferrer says.
For many cryptocurrency enthusiasts around the world, decentralized and digital currencies are primarily about ideology or profit. But for many Argentinians, it caters to more basic needs.
“I trust math and software more than politicians. I think bitcoin should be a good idea for Argentines,” Ferrer says.
Cryptocurrency, a solution to inflation?
The strong government intervention in the economy facilitates the establishment of cryptocurrencies in Argentina, and in many other ways. For example, it is relatively cheap to run an energy-intensive bitcoin mining operation as the cost of electricity is kept relatively low.
Mining is the process that creates new bitcoins. These are computers that solve complex mathematical problems. Solve the problem and you will receive bitcoins. It sounds simple, but the process involves complicated computer systems, which require a lot of electricity to operate and cool.
The University of Cambridge’s Center for Alternative Finance estimates that the electricity used for bitcoin mining worldwide is about 137 terawatt hours per year. This is roughly equivalent to the annual consumption of some countries, such as Norway or Poland.
The generation of this electricity will contribute to global carbon dioxide emissions, but its magnitude is difficult to estimate.
In Argentina, however, these environmental concerns are often overshadowed by financial concerns.
For some cryptocurrency enthusiasts in Argentina, even a relatively young and unpredictable currency is preferable to the highly fluctuating peso.
Bitcoin, the most popular cryptocurrency, can also help hedge against high inflation because the amount of money that can be created is limited.
Inflation, which measures changes in the cost of living over time, is a constant concern in Argentina. Annual inflation is staggering and can reach over 50%.
“During the pandemic, people noticed this situation. And to protect their money, they chose to look for an asset that was limited,” explains María Mercedes Etchegoyen.
Etchegoyen is a lawyer specialized in intellectual property. She is a member of the executive committee of the NGO Bitcoin Argentina and helped create the Cryptogirls community to take advantage of the increased interest in cryptocurrencies during the pandemic.
So far, the government has taken a soft stance after the cryptocurrency boom. “In Argentina, there are no specific rules for cryptocurrencies,” Etchegoyen explains.
However, the Central Bank has warned of cases of scams related to cryptocurrencies.
She acknowledged that the level of cryptocurrency usage was not yet very high, but was growing rapidly and needed to be addressed.
Access to cryptocurrencies
Etchegoyen is concerned about unequal access to cryptocurrencies.
Until now, they have been reserved for a minority – mostly a young, male, tech-savvy and relatively affluent population. It is the technical workers, not the farmers, who are paid in bitcoins.
“Today it is not a technology that is accessible to everyone,” admits Lucia Lizardo, a blockchain consultant.
Still, efforts are underway to expand the reach of cryptocurrency, in part through financial products that provide a stepping stone between traditional currencies and cryptocurrency.
Three Argentine start-ups now offer debit cards for cryptocurrency transactions. One such company, Lemon, was founded in a city in Patagonia where 40% of stores accept bitcoin.
Some Argentines are also turning to “stablecoins”, which are pegged to the US dollar and therefore less subject to fluctuations in value.
Of course, cryptocurrencies will not be a one-size-fits-all solution to Argentina’s economic problems. And they come up with issues of currency speculation, fraud and environmental impact.
But overall, “I think it’s a revolution for young people,” Lizardo says.
For Ferrer, the need is clear: “It’s our money, and it’s the one thing politicians can’t destroy.”