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March 13, 2023 14 mins

Argentina is one of the countries with the highest rates of inflation in the world -  currently hovering at close to 100%. 

The nation is also one of the countries with the biggest population of crypto enthusiasts. In this environment, digital currencies can be perceived as a safer bet than the peso. 

This popular enthusiasm for digital tokens has faced pushback from the country’s central bank. But ever since the crypto winter has stepped up volatility, and exchanges like FTX collapsed, many Argentinians likely feel squeezed: with fewer ‘safe’ places to protect their life savings from inflationary pressures.

Bloomberg’s Nacho Olivera Doll reported on a recent study by Buenos Aires-based Wunderman Thompson - it found that nearly two-thirds of the nation’s crypto investors use digital currencies as a way to protect their savings. He joins this episode to discuss.

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Episode Transcript

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Speaker 1 (00:02):
I'm Stacy Marie Ishmael, Managing editor of Crypto for Bloomberg News,
and this is Bloomberg Crypto, a daily Bloomberg IHOT podcast.
It's Monday, March thirteenth. I'd argue that one of the

(00:27):
most interesting things about crypto is that you can see
it as a sentiment indicator for how people feel about
their banks and how they feel about their governments. Diehard
bitcoin believer, probably not the biggest fan of central banks,
Probably someone very worried about the effects of inflation, Probably
someone who doesn't like the government telling them what to do.

(00:48):
Enter Argentina. One of the countries with the highest rates
of inflation in the world, one of the countries with
a government that makes it very challenging to move money
in and out of the country, and one of the
places with the biggest populations of crypto enthusiasts. These facts
are absolutely related. Argentina's inflation rate is currently hovering close

(01:08):
to one hundred percent, yes, one hundred percent. In this environment,
digital currencies are perceived as a safer bet than the
peso if you're looking for an asset that will hold
its value. My colleague Natcho Oliveradal reported on a recent
study that found that nearly two thirds of the nation's
crypto investors use digital currencies as a way to protect

(01:31):
their savings. This popular enthusiasm for digital tokens has not
surprisingly faced pushback from the country's central bank. And now,
as the dust settles from the collapse of FTX and
the global crypto industry is, as they like to say,
trying to rebuild, Argentine regulators are considering tightening oversight even further.

(01:52):
NATO is a Bloomberg reporta and a trained economist based
in Buenos Aires. He joins me now to discuss Welcome
to the podcast. Tell our listeners a little bit about
the coverage that you've been doing of crypto and Argentina.

(02:14):
Why is crypto so popular among your you know, among
folks in the country. Argentina is one of the nine
countries with the highest adoption of cryptocurrency. According to the analysis,
the cryptocurrencies became very attractive, very successful way to avoid

(02:36):
capital controls. Argentina has had strong capital restrictions during age
of its last twelve years. Argentine only come by dollars
in the capital market at a price that's one hundred
percent more expensive. They can't make transfers abroad or from
abroad freely. If an Argentina makes transfers in dollars from abroad,

(03:02):
the central bank will convert these dollars into pasos at
the official exchange rate and the person will lose half
of his money. Argentines have learned to live this way
in recent years, and that's why they have sold for
an infinite number of mechanisms to bypass government restrictions and

(03:28):
avoid losing money due to regulations. That's interesting because it
sounds like what you're saying is they're trying to use
crypto to get access to US dollars that they wouldn't
otherwise be able to have. Yes, because by buying and

(03:49):
selling cryptocurrency, Argentines can get out of the peso avoiding
government rules. They also cancel dollars at a higher exchange
and can move their money out of the country free.
The Argentine's expectations about the paso, it's so poor that

(04:11):
today all of them prefer bitcoin or any other cryptocurrency
or where the paso inflation here reaches one hundred percent
per year. So the story in pasos is not a
good option. So if I'm understanding the two trends that

(04:32):
you've identified here correctly. You have, on the one hand,
people facing real restrictions on their ability to move money around,
especially from Argentina to other countries or from other countries
to Argentina. And you have the fact that the paso
seems to be, because of inflation, an even less reliable

(04:56):
store of value than highly volatile crypto Tooken white bitcoin. Yes,
but typically Argentine's use bidcoin either and stable coins. Stable
coins in this country are popular because Argentine's thinking dollars.
The companies can currently promote the purchase of stable coon

(05:20):
as a digital dollars, which is not exactly like that,
but Argentine's think that by buying stable coins they can
circument restrictions and have the dollars that the government does
doesn't allow them to buy. It doesn't sound like that
would be super popular with the government, though, if you

(05:44):
have a majority or a large number of people in
the country being like, how can we work around these restrictions.
What's been the reaction of the central bank the last
year the Argentine Argentina's Central Bank email a statement in
which it provided traditional financial institutions from offering their clients

(06:09):
or customers transactions with digital assets, including cryptocurrency, are going
that they were risky. It is now that in those
days there were different positions on this issue, even within
the central Bank, but finally banks had to stay out

(06:32):
of the crypto ecosystem. Now something else is happening. Relators
start to get involved in crypto issues and are frequently
talking with the main players of the crypto ecosystem. Now,
the capital market, the Relator and the local Money lander
In Agency are working to start regulating the sector in

(06:56):
the first half of this year. So is it that
they were always going to crack down on crypto because
people were trying to use stable coins like you mentioned,
to evade these capital controls or did some of this

(07:17):
become more urgent for the government after, for example, the
collapse of FTX. The Argentina's government changes behavior after the
fs event. The country's local Relator is a studying launching
requirements on crypto companies, such as proof of solvegncy. Official

(07:40):
officials and relators planned to demand that crypto companies have
similar requirements as others in capital markets, such as knowledge
of the customers transparency about their activities. Also Argentina's government
is seeking to strengthen relation before of a visit by

(08:01):
the global money launder, which is expected for a September
coming up. More from Bloomberg reporto Natural Olivera dol on
how the Argentine crypto ecosystem is shaping up post FTX.
We'll be right back. Has the collapse of FTX changed

(08:26):
or affected the popularity of crypto among the people themselves?
Are they more concerned about risks or do they still
think it makes sense given the capital controls you described,
given the inflation rates close to one hundred percent. Argentina's
users were heavily affected by the FTS meldown, with some

(08:51):
of the large local crypto exchanges seen withdrawals of as
much as twenty five percent of the deposits. The most
affected by the by this event was Lemons, which is
the Argentina's large exchange in number of users. Lemon had

(09:13):
investment in Alamera, the fts found and the panic is
spread in social networks. We don't know which is the
size of the proportion of investment the Argentines had in FTX,
but the industry admit at the end of February that
there may be more exchanges affected. So one of the

(09:37):
stories that you and your colleagues have reported on is
the fact that Argentina has one of the highest percentages
of people who want to get their salaries paid in crypto,
which very much relates to what you describe before about
people wanting options that are not the piso. How easy

(10:02):
is it to get a salary in crypto in Argentina.
Argentina has a higher proportion of employees getting paid in
cryptocurrency than anyone having a salary in pasos in Argentina
is a punishment or misfortune. Taxes inflation reduced the salary

(10:24):
in Latin America. It was the first presentation of the
artists in Latin America received by Argentines, which is today
well below the average for the region. The government takes
away thirty five person or more from the gross wages,
so that seven out of ten Argentines are unsatisfied with

(10:48):
their salary. The average salary in Argentina is less than
three hundred dollars. It's well below the five hundred dollars
in Brazil or the age one hundred and fifty dollars
in Chile. This means that Argentinian people preferred cryptocurrency over others,

(11:09):
especially since they can't take them out of the country
and keep them saved from government threats. Local legislation allows
local companies up to twenty percent of payment in time.
This way, many companies improved salaries by offering cryptocurrencies. It's

(11:35):
so interesting to hear you say that, because in most
other places, when we've spoken to folks and they're like, yeah,
we in Miami, people are really interested in getting paid
in crypto, and then they're like, oh, but they're super
not allowed. So you know this, it seems like there's
an interesting difference between on the one hand, the government

(11:56):
wanting to crack down more on crypto, but on the
other hand, there's this loophole that is still allowing people
to get at least some of their salaries in bitcoin
or other tokens. So it sounds to me like folks
in Argentina are dealing with a combination of local effects

(12:18):
capital controls, really high inflation rates, incoming potential regulation, and
also the broader international crypto winter. Do you see in
your reporting any signs that local enthusiasm for crypto is

(12:39):
going up or down in twenty twenty three. In the future,
then system in Argantina is convinced that this will be
the year of blockchain projects and the physical events that
day center when I through meda apparent in the ecosystem,

(13:05):
I believe then more than half of the crypto started
ups will disappeared due to the scarcity of quidd but
the projects that give good blockchain based solution will survey
a speculation is so where it is the time for
the projects. Great natur Thank you so much for joining today.

(13:27):
I really appreciate the chance to have you on the show.
I'm so excited that you made it. Thank you for
our Stacey. That was Bloomberg Reporto Natural OLIVERA. Dol You
can find more of his reporting on the Bloomberg terminal
and on Bloomberg dot com. For more, be sure to
check out our twice weekly newsletter, Bloomberg Crypto. This is

(13:50):
Bloomberg Crypto, a daily podcast from Bloomberg and iHeartRadio. For
more shows from iHeartRadio, visit the iHeartRadio app, Apple Podcasts,
or wherever you get your podcasts. Send us your comments,
questions or suggestions for the show to Crypto at Bloomberg
dot net. The supervising producer of Bloomberg Crypto is Vicky Vergelina.

(14:12):
Our senior producer is Janet Babin. Our producers are Mohammed
Faroup and Sharon Barrero. Our associate producers are Ty Butler
and Moses on Them. Desta wander Ad is our engineer.
Original music by Leo Sidron. I'm Stacy Marie Schml. We'll
be back tomorrow.
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