High inflation in Argentina leads people to increasingly consider a stablecoin-based economy



In Argentina, the sharp devaluation of the local currency is devastating the country’s finances, and many see stablecoins as a safe place to park their money.

In fact, the Argentine peso has lost about 60% of its value in the space of a year while at the same time inflation gallops at a steady pace, threatening the purchasing power of the South American population.

Javier Miller, the country’s presidential candidate in October, could support an economy based on stablecoins and cryptocurrencies in general.

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The sharp devaluation of the Argentine Peso

Argentina is experiencing a highly troubled time in the monetary realm, with its local currency, the Argentine Peso (ARS), steadily losing value and residents adopting alternative solutions such as crypto stablecoins.

Inflation reached the insane 115% mark in June and is leading to a sharp devaluation of the purchasing power of the entire population.

The weakness of the ARS is actually nothing new for Argentines, as the currency has been losing value against the dollar for decades.

Just think that since 2013 it has lost about 98% of its value, while in the last 12 months the decrease has been about 53%.

This is an unrestrained descent: if the situation continues like this shortly the Argentine Peso will become waste paper.

In recent months the downward trend against the US dollar seems to be accelerating, with the Argentine peso losing 41% since the beginning of the year.

In the last week alone it has lost more than 20% of its value reaching the exchange rate of $0.00246 per peso.

This kind of devaluation for a national currency can create serious damage to the finances of the population, which is seeing its ability to purchase exported goods reduced ever more.

The difference is stark compared to other more developed countries with strong central banks such as America, Canada, and the entire European Union.

The current economic crisis in the South American state is so severe that it is comparable to that of the late 1990s.

Stablecoin: a solution for inflation in Argentina

To cope with this extremely difficult situation, the Argentine population is resorting to the use of cryptographic stablecoins with value pegged to that of the US dollar.

Some local sources report an increase of up to 500% in cryptocurrency volumes moved, mostly with USDT being the undisputed market leader in stablecoins.

Argentines prefer these blockchain-based solutions over the dollar itself because of the advantage it offers in the immediate availability of online markets.

Indeed, physical dollars are valuable to obtain in the South American country, where obviously no one would ever again exchange the peso, which constantly loses value, with the stable US currency.

After this week’s devaluation announcement that brought the official exchange rate to 350 pesos per dollar, all the P2P crypto exchange markets have seen incredible growth in volumes.

The high demand has even led exchanges and centralized exchange providers to resort to wholesale purchases of stablecoins by paying prices above the current exchange rate. This surcharge has obviously spilled over into the Argentine crypto markets, where USD-pegged currencies are trading at higher prices than physical dollars.

As mentioned, the USDT crypto, issued by the British Virgin Islands company Tether, is the most traded in this context as a hedge to the devaluation of the Argentine peso, as well as being an export settlement currency.

According to a source inside the website “Bitcoin.com”:

“A lot of imports and exports are settled in part with USDT due to the lack of access to currencies. They also use it as a hedge because today there are no reference prices: they don’t know how much they will pay for the needed supplies.”

Javier Miller: Argentina’s pro-Bitcoin presidential candidate may be in favor of using stablecoins in the country

On the political front comes good news in Argentina, where a new presidential candidate in October may be pushing for accelerated adoption of Bitcoin and stablecoins.

In fact, libertarian Javier Miller and his “La Libertad Avanza” (LLA) party won the primary election on Sunday, 13 June, reaching 30% of the vote and thus running for the October 2023 presidential election.

Miller is a proponent of the Bitcoin philosophy, as well as an expert in economics having been a professor of macroeconomics, microeconomics, and mathematics for more than 21 years at various universities around the country.

A few months ago he described the quintessential cryptocurrency as “a natural reaction to the central bank scam.”

He is also known to want to dollarize the entire country by removing the country’s inflation nightmare forever.

Based on these assumptions, we can speculate that in the event of a victory in October against the historic center-right and center-left parties, the stablecoin market could increase in popularity in Argentina by becoming the standard rather than the exception of the moment.The use of stablecoins such as USDT and USDC could speed up transnational payments with other countries as well as streamline exchanges in online business marketplaces.