Alberto Fernandez, President Of Argentina, Is Open To Adopting Bitcoin As Legal Tender To Fight Inflation.
This week Alberto Fernandez, President of Argentina, suggested he was open to adopting Bitcoin as legal tender to fight inflation. The comments were made during a local television interview aired by Filo News.
During the interview Fernandez was amenable to the idea of Bitcoin becoming legal tender and taking on a larger role in Argentina’s economy.
When asked whether Argentina would follow the path of El Salvador in terms of Bitcoin adoption, the president said, "I don't want to go too far out on a limb [...] but there is no reason to say no."
It is important to note that while Argentina and El Salvador both suffer from inflation, the U.S. dollar is not legal tender in Argentina, and they have tight currency exchange controls, which create a black market for foreign and digital currencies.
Argentina is currently seventh in the world inflation index with an inflation rate of 51.8 percent, according to Trading Economics. In correlation with this statistic, in 2020 Bloomberg listed Argentina as the second most miserable economy in the world. The country’s need for a hard store of value such as Bitcoin is readily apparent.
During an interview with media outlet Caja Negra, Fernandez was asked if he would consider an Argentinian CBDC, or even follow in El Salvador’s footsteps and adopt Bitcoin as legal tender. He replied: “I don’t want to go too far out on a limb … but there is no reason to say ‘no.’” He added: “They say the advantage is that the inflationary effect is largely nullified.”
According to Bloomberg’s World Misery Index, Argentina is the second-most “miserable” economy in the world, as inflation has skyrocketed over the past two years. Since Fernandez’s predecessor, Mauricio Macri, left office, government data indicates that the Argentinian peso has lost significant purchasing power, with 100 pesos in 2019 being the equivalent of 661 pesos today.
Despite recognizing Bitcoin’s potential to act as a hedge against troubles in the global economy and combat the legacy of his predecessor, Fernandez said he was still wary of the cryptocurrency sector “because of how unfamiliar it is, and because it is hard to understand how this fortune materializes. Many people in the world have these concerns, and that is why the project, or the system, has not yet expanded [more than it has]. But it is something to consider.”
Although Fernandez remains open to crypto and CBDCs, Pesce appears to be threatening a crackdown on the industry. Speaking at the Argentine Institute of Executives of Finance Digital Finance Forum on August 10, Pesce said Bitcoin was valuable for investors only during short-term hype cycles, and that it was not a financial asset as defined by the country’s National Securities Commission.
Pesce expressed the central bank’s intention to regulate Bitcoin payments and crypto exchanges, and its priority to prevent unsophisticated investors from engaging with crypto assets. “We are concerned that [cryptocurrencies] are used to generate undue profits on unsuspecting people,” he said.
Inflation is one of the most sensitive issues in Argentine politics. Fernandez inherited the second-most “miserable” economy in the world, according to Bloomberg's World Misery Index, from former president and businessman Mauricio Macri. According to the government’s own data on inflation, $100 at the beginning of Macri's term would be equivalent to $661 today.
The country also imposes strong currency exchange controls, which caused a boom in the black market for foreign currency—something very different from the Salvadoran reality, where the U.S. dollar is legal tender.
Fernandez, however, tempered his interest in cryptocurrencies like Bitcoin as potential hedges against inflation with a healthy dose of caution.
"It is a global debate, and I must confess that it is a topic [that I approach with] caution. In my case, there is caution because of how unfamiliar it is, and because it is hard to understand how this fortune materializes," he said, referring to how the value of Bitcoin has increased throughout the years. "Many people in the world have these concerns, and that is why the project, or the system, has not yet expanded [more than it has]. But it is something to consider," said the president.
Interest in cryptocurrencies has increased considerably in Argentina in recent years, largely because it can be used as indirect exposure to the U.S. dollar, which protects investors in the country from the devaluation of the local currency, the Argentine peso. Beyond just Bitcoin, stablecoins such as DAI are also popular among Argentine traders.
But before Bitcoin enthusiasts get too excited, the Argentine president’s words should be measured against those of the country’s central bank. Earlier this week, the president of Argentina's central bank, Miguel Pesce, said he believes Bitcoin “is not a [real] financial asset, and does not generate any [lasting] profitability.”