Bitcoin traders in Argentina are prohibited from buying US dollars. The ban is a desperate attempt by the central bank to halt capital flight and tame inflation.
In a announcement on Thursday, the central bank announced that people who have bought Bitcoin or other digital assets with pesos in the past 90 days will no longer be able to buy US dollars at the official rate.
Stop capital flight
With this measure, the Argentine central bank hopes to stop the capital flight from the country. Until recently, this was easy to do via cryptocurrency and dollars. If an Argentine had pesos in his bank account, he or she could buy US dollars with it from a regulated trading platform and then invest those dollars in Bitcoin.
This basically means that US dollars are disappearing from Argentina, which is bad for the Argentine economy. The big problem for Argentina, the third largest economy in Latin America, is inflation which is currently at a 64 percent state. That is the second highest inflation rate in the region, as Venezuela is obviously at the top with the highest inflation rate in the world.
Crypto big in Argentina
Due to high inflation, crypto is popular in Argentina. When inflation in a country hits 64 percent, you don’t have to explain to anyone that the absolute scarcity of Bitcoin can be an attractive alternative means of savings. Bitcoin hasn’t been doing great in recent months either, but bottom line it still outperforms the Argentine peso. It is also not for nothing that the Human Rights Foundation regularly points to Bitcoin as a solution for these kinds of countries.
However, the question is to what extent the Argentine central bank allows the adoption of crypto in Argentina. In the West, the fiat currencies are not yet under as much pressure as in Argentina. There, the government monopoly on the money press is now in real danger, which makes it an interesting test case for Bitcoin. How do governments react to Bitcoin when the pressure really comes on? We will see that in Argentina in the coming months.