In Argentina, there are traces of insecurity and even trauma in every area related to the economy.
Memories of the economic crisis of the late 1990s are still vivid for Jerónimo Ferrer. At the time, people’s bank accounts were frozen, and everyone’s savings evaporated almost overnight.
Ferrer is not alone. One engineering student I spoke to keeps all of his savings at home in U.S. dollars. This is because of his fear that all his assets in the bank will be devalued again overnight.
Although many Argentines are experts in economics, from high inflation to exchange rates due to the country’s conditions, Ferrer went a little further.
Since 2019, Ferrer has been organizing a walking tour called “Our crazy economy in Buenos Aires and our Bitcoin tour,” in which he explains to tourists the level of restrictions faced by Argentines, such as restrictions on foreign exchange transactions and prohibitions on installment payments on international flights.
On the other hand, it offers a start to why cryptocurrencies, especially Bitcoin, are a valuable alternative to the volatile Argentine peso.
Ferrer says, “When you have constraints, you need tools for freedom.”
For cryptocurrency enthusiasts in many parts of the world, this system is primarily related to ideology or profit. But for many Argentines, it meets more basic needs.
Noting that he has more to believe in mathematics and software than he has in politicians, Ferrer says, “I believe that for Argentines, Bitcoin should be something that does not need to be thought about at length.”
Apart from the government’s strong interventions in the economy, there are other reasons why cryptocurrencies have gained status in the country. One of them is to keep electricity costs relatively low. Therefore, mining Bitcoin is also partly cheap.
Bitcoin mining is the name given to the process of creating new Bitcoins. It happens when computers solve complex mathematical problems. When machines solve problems, Bitcoin is creating. It may sound simple, but it takes a lot of electricity to run and cool these computers.
The Centre for Alternative Finance at the University of Cambridge estimates that the electricity used to mine Bitcoin globally is about 137 terawatt hours per year. This is more or less the same as the annual electricity use of some countries, such as Norway or Poland.
Generating this electricity will also generate carbon dioxide emissions on a global scale. But it’s hard to predict how much that is.
But in Argentina, such environmental issues are often overshadowed by financial concerns.
For some, even relatively new and unpredictable cryptocurrencies seem preferable to overly volatile pesos.
Bitcoin, the most famous cryptocurrency, can also help buffer against high inflation due to the limited number of coins that can be created.
The concept of inflation, which measures how the cost of living changes over time, is an ever-present concern for the Argentine people. The annual inflation rate is staggeringly above 50 percent.
María Mercedes Etchegoyen says that during the pandemic, people have noticed this situation and are turning to looking for a limited asset to protect their money.
Etchegoyen, a lawyer specializing in intellectual property, is also a board member of the non-governmental organization Bitcoin Argentina. To capitalize on the growing interest in cryptocurrency during the pandemic, she was involved in the founding of a community called “Cryptogirls” (a community of women engaged in cryptocurrency).
The government has so far taken a relaxed stance against the rise of cryptocurrency. Etchegoyen also states that there is no special regulation on cryptocurrency in Argentina.
However, the Central Bank of Argentina warns about crypto-based fraud.
In these warnings, the bank stressed that the level of crypto use is not yet high, but it is growing rapidly and therefore deserves concern.
Etchegoyen has expressed concern about unequal access to cryptocurrencies.
So far, cryptocurrencies have been under the auspices of a minority – a largely young, male, tech-savvy, and relatively wealthy population. As a matter of fact, it is not the farmers who make the payments with Bitcoin, but the technology workers.
Blockchain consultant Lucia Lizardo also says of cryptocurrencies, “Today this is not a technology that everyone can access.”
Still, efforts continue for the proliferation of cryptocurrencies. Financial products established between traditional currency and crypto coins also have a share in this.
Three Argentine tech startups offer debit cards for crypto-based transactions. One of these companies, Lemon, was founded in a Patagonian town where 40 percent of shops accept Bitcoin.
Some Argentines are also turning to “stablecoins” (stablecoins) whose value is pegged to the US dollar.
Cryptocurrencies, of course, will not offer a one-stop solution to Argentina’s economic woes. However, speculation brings with it problems such as fraud and its impact on environmental issues.
Lizardo argues that this is like a revolution for young people.
For Ferrer, the need is clear:
“This is our money. That’s the only money politicians can’t destroy.”