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Contxto – With hyperinflation and loss of Argentine peso purchasing power, some of you may be aware that Argentina is embracing cryptocurrency to get out of this debacle.
So much so, Bitcoin trading on the Localbitcoins platform recently reached its third-strongest week on record. For the week ending on October 26, crypto users exchanged ARS$14.5 million (over US$243,000) for Bitcoin.
U.S. dollar limitations in Argentina
Things recently reached a whole new level of complexity in Argentina following the October 27 election. Proceeding the defeat of former president Mauricio Macri, the Central Bank announced the limit of U.S. dollars citizens can purchase. Specifically, this applied to Argentines traveling abroad, according to Infobae.
According to CoinTelegraph, this maximum went from US$10,000 a month to a measly US$200, active for the next two months. Based on the recent 98 percent drop in the amount of U.S. dollars one can purchase, Bitcoin transactions have reportedly skyrocketed.
“Given the current degree of uncertainty, the Board of Directors of the BCRA decided to take a series of measures this Sunday that seek to preserve the reserves of the Central Bank,” said the monetary authority, in a recent statement.
“It establishes a new limit of $200 per month for dollar purchases for individuals with a bank account and $100 for the number of dollars that can be purchased in cash. These limits are not cumulative.”
This announcement comes after leftist candidate Alberto Fernandez won the presidential race last Sunday on October 27. While former president Macri was a Bitcoin fan, even meeting with the renowned venture capitalist Tim Draper to discuss the cryptocurrency replacing the Argentine peso, Fernandez isn’t as big of an advocate.
Moving forward, now citizens can purchase up to US$200 if they have a bank account and traveling abroad. On the other hand, those purchasing dollars in cash can only buy up to US$100. With this, Bitcoin trading continues to surge, despite other challenges.
Cryptocurrency in Argentina
Historically, Argentines have purchased U.S. dollars in times of economic turmoil as a means to preserve their purchasing power. In turn, they provide rapid liquidity options when the Argentine peso isn’t worth so much.
“It’s not your money if you need permission to use it,” said Twitter analyst Rhythm following the news of the dollar limits.
However, many critics of the Central Bank contend that the authorities are trying to block U.S. dollars from entering the country as a means to strengthen the fiat currency, the Argentine peso. Even more, some believe that the central bank wants to curb Bitcoin’s influence.
This week, the Central Bank also reportedly banned the purchase of Bitcoin with credit cards.
Still discerning why the Central Bank limited Bitcoin via credit cards, some believe it was to preserve foreign exchange reserves. Ultimately, the goal seems to be to strengthen the Argentine peso by limiting the use of other currencies.
“Acquisition of Bitcoin and cryptocurrencies: It is prohibited to purchase BTC with this payment method,” said the Central Bank in a recent statement. “The only remaining alternative for this investment is to do so with funds transferred from a bank account.”
Recently, the reserves have lost over US$20 billion due to high inflation rates. At the moment, they stand at US$43.4 billion.