Argentina’s push away from the peso toward cryptocurrencies has picked up speed – at least temporarily – after the country’s economy minister quit.
Martin Guzman’s resignation on Sunday appeared to cause a spike in tether (USDT), a stablecoin pegged to the US dollar, over the weekend.
Argentina’s economy minister role is similar to that of a finance minister.
Argentinians 'don't want to get poor'
Tether spiked on multiple cryptocurrency exchanges in Argentina, including Binance and Lemon Cash, according to Crypto Potato.
According to one digital fund manager the explanation for this latest expansion of the Argentinian crypto sector was simple: in Argentina people:"don’t want to get poor".
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Terra’s troubles not a factor
Argentinians continue to veer towards crypto despite the Terra blockchain’s troubles, which caused the original luna coin and terraUSD stablecoin to collapse.
The weekend spike in tether also occurred even though troubled crypto lender Voyager Digital froze deposits, withdrawals and rewards, and hedge fund Three Arrows was reprimanded by the Monetary Authority of Singapore (MAS) and the company filed for US bankruptcy protection.
Argentina is showing strong demand for cryptocurrency despite apparent federal efforts to limit its use.
In May, Argentina’s central bank (BCRA) prohibited banks from offering cryptocurrency services that are not regulated by it. The move came shortly after one bank, Banco Galicia, launched a service trading bitcoin (BTC), ether, which is the coin backed by the Ethereum blockchain, USDC, and Ripple (XRP).
Banco Galicia was the first lender in the country to offer digital asset trading services. Many Argentines living in Buenos Aires and elsewhere are investing in crypto as a hedge against skyrocketing inflation, which is above 60%.
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Argentina’s third hyperinflation era
Andrew Durgee, head of Republic Crypto, the asset management arm of Republic and its Republic Crypto Fund, told Capital.com that Argentinians “have a real use case for crypto” and use it to fight poverty.
Durgee recalled a conversation with an Argentinian politician whom he did not identify.
“I had dinner with him in Montevideo and he told me at the time, ‘Andrew, America just doesn’t understand where I’m about to live through my third hyperinflation [era] in Argentina, and there’s just nothing I can do about it,’ ” said Durgee.
“Americans are into [the] blockchain and crypto because they want to get rich. means of fighting poverty. In Argentina … we just don’t want to get poor.’
“And, that was a really powerful thing to hear, and emotional, coming from him at the time. And he said, ‘Listen, if I can’t have any influence or control over the economic scenario of this country, and I’m actually involved in it at the political level every day, how does a regular person feel?’ ”
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Pessimism dates to 2001
Pessimism about the peso dates back to 2001, when systematic economic mismanagement led to the Latin American country defaulting on $80bn of sovereign debt, and being locked out of the global capital markets until 2016.
In 2010, the Argentine government nationalized global energy giant Repsol’s entire gas operation in the country. Also, in 2008 during the global financial crisis, the government nationalized the nation’s $30bn pension system.
State has record of seizing assets
President Cristina Fernandez de Kirchner said the move was designed to protect retirees during the global economic meltdown.
But her political opponents claimed that she was scrambling for cash to prop up tax revenue.
Fernandez now serves as vice-president and she clashed with the former economy minister Guzman, prompting him to resign, Reuters reported. Fernandez de Kirchner had called for more government spending to offset higher poverty levels. Guzman has since been replaced.
Governments fight rising prices
Recently, governments around the world have taken steps to curb inflation sparked by Russia’s invasion of Ukraine and the conflict’s impact on global energy prices.
On Tuesday, the Australian government is expected to introduce an interest-rate hike that aims to reduce inflation. The US and Canada have also implemented hike at rates not seen for decades.
In addition, US Federal Reserve chief Jerome Powell said central banks are starting to understand how little they know about inflation.
But more Argentinians know how much they like cryptocurrency.