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In recent years, crypto has boomed and hit new heights. Governments like El Salvador have endorsed cryptocurrency. It has made a strong use case for itself in countries with political and economic instability. One such country is Argentina. Cryptocurrency in Argentina has seen explosive growth due to the country’s unstable financial system. Argentines have been steadily using decentralized cryptocurrencies which they believe provide better security for them. Argentina and cryptocurrency seem to have entwined their fates. Let us look at a timeline of how the country has embraced cryptocurrency.
Cryptocurrency in Argentina: Why the Country is Embracing Crypto in 2022
How Argentines started using Crypto
Argentina has had a difficult past in regard to its economy. They have gone through a depression that was caused by heavy recession that led to people’s savings disappearing from their bank accounts or even having their accounts completely frozen. Since the financial crisis that Argentina suffered in the late 90s and early 2000s, people have been wary of storing their money in banks.
The country also suffered a more recent recession in 2018. The country suffers from enormous debt obligations which are compounded by high inflation and the COVID-19 pandemic. The Argentine peso became highly volatile, leading to uncertainty in the fate of the economy. People started finding ways to ensure they had financial security which led them to begin trading, selling and buying crypto in 2019. Argentina and cryptocurrency then became a common phrase in South America.
Use of Cryptocurrency in Argentina
Argentina is one of the earliest users of cryptocurrencies in Latin America mainly because of the economic instability and foreign exchange restrictions imposed by the government. 2019 saw a slow increase in the use of crypto in the country. Argentines found it was a safer way to ensure that they had their finances sorted in an unstable economy. With the number of restrictions imposed on them, the Argentines needed to find tools that will help them towards financial freedom. The tool that they chose was crypto. Many people adopted Bitcoin and businesses were even willing to conduct transactions using Bitcoin rather than the peso. This answered the question: Is Bitcoin legal in Argentina?
Rise of Cryptocurrency in Argentina
The adoption of cryptocurrency in Argentina was uneven mainly because traders were mostly young males who had a tech background which helped them understand the market. However, this did not deter the rise of cryptocurrency in Argentina. Analysts state that Argentines earned $1.86 billion in cryptocurrency in 2021 ranking them 10th in the crypto adoption index. The extreme volatility of cryptocurrencies did not stop Argentina’s economy from becoming one of the prime breeding grounds for crypto globally. Argentina and cryptocurrency were developing a strong bond.
Adoption of Cryptocurrency in banks
The use of cryptocurrency in Argentina rose and grew six times since its start in 2021, making Argentina one of the top crypto users worldwide. Because of the popularity of crypto in the country, banks were also beginning to offer services where people could buy and sell cryptocurrencies on their platform. This saw crypto moving towards mainstream adoption in the country.
From late April to early May of 2021, one of Argentina’s largest private banks, Banco Galicia (GGAL), even added a feature on their banking app that allowed users to buy and sell cryptocurrencies on their platform. Users could acquire bitcoin (BTC), ether (ETH), USDC and XRP through their platform. Other banks in the country also began providing similar services to their customers. The love affair between Argentina and cryptocurrency grew stronger.
Banks are Not Allowed to offer Cryptocurrency Services
Private banks being allowed to provide cryptocurrency services to the people of Argentina were shortly disallowed soon after they launched the services on their platforms. On the 7th of May 2021, Argentina’s Central Bank, BCRA, barred banks from providing services for digital assets that are not regulated by them.
However, this did not affect Argentines trading crypto as they were still able to trade on local exchanges using their bank accounts to send and receive pesos. Many speculations arose to discover the main reason for this bar. One of the speculations suggests that the BCRA had a debt deal that includes a provision that discourages the use of cryptocurrencies. However, there is no confirmation of whether this speculation is true or false to this day.
Popular Cryptocurrency in Argentina
Private banks being disallowed to conduct crypto transactions was a shock to the crypto exchanges in Argentina. This is because from 2018 to 2021, Argentine crypto exchanges saw a huge growth of users on their platforms. Argentines could acquire dollar-pegged stablecoins that consequently helped to increase the use of stablecoins. One exchange even surpassed a million users in 2021, with other exchanges looking to reach the same numbers at the end of 2021 with a 100% growth rate every month.
Seeing the growth rates increase every year in the number of crypto users in Argentina, one would assume that the trend would continue. However, the crypto exchanges in the country are operating without a financial institution license. This could cause the love story between Argentina and cryptocurrency to unravel.
The Central Bank in Argentina has not taken any actions against the crypto exchanges in the country, but the current administration in the country does not seem to be crypto-friendly which keeps the exchanges on their toes. Some fintech companies are already under investigation for allegedly offering unauthorized financial intermediation through crypto assets. The fear that the BCRA may take action against the crypto exchanges has currently affected the crypto market in Argentina.