Online instability in the foreign exchange markets has helped give Argentina one of the highest cryptocurrency adoption rates in the world. As the peso continues to show weakness and a liquidity crisis deepens, could this lead to Argentina becoming a crypto-only economy?
The Historical Examples
While there haven’t been any examples of countries moving completely to digital currencies, there have been interesting cases of cryptos being made official currencies. El Salvador hit the headlines in 2021 when it made Bitcoin legal tender, alongside the US dollar. Opinions are divided on whether this was successful or not. The country has certainly gained massively from its own BTC holdings, but it appears not to have boosted financial inclusion and efficiency as expected.
The next example came from the Central African Republic (CAR), which followed El Salvador in adopting Bitcoin as a legal currency in 2022. The plan was viewed as risky by the International Monetary Fund (IMF), which felt that it could lead to increased instability in the country. This decision was reversed later the same year, with a lack of infrastructure and poor planning blamed. They then attempted to launch the BTC-backed Sango Coin, but this idea also fell through quickly.
The Main Risks
Those examples show us that there are several risks to take into account. One of the main issues in those countries is a lack of widespread adoption, which perhaps wouldn’t be as big an issue in Argentina, where a large percentage of the population is already comfortable with using cryptocurrencies.
Using a decentralized currency would take control of the supply and interest rates out of the hands of the central bank. Any country that only uses BTC or another digital asset would lose a large degree of control over how its money is handled, which would be a major concern.
How Are Cryptocurrencies Handled in Different Countries Now?
Argentine citizens can freely buy and sell many crypto tokens online, using centralized and decentralized exchanges, allowing a great deal of flexibility. The popularity of BTC and other coins means that it’s possible to use them for some everyday purchases or at ATMs. However, the main use in Argentina is as a hedge against inflation and changes to the peso.
To see what even more widespread crypto use looks like, we can check the situation in India, which is currently regarded as the global leader in this technology. Indians use digital assets for a variety of reasons, including savings, cross-border payments, decentralized lending, and web3 startups.
The US had traditionally been another leader in the cryptocurrency space, with many of the leading companies and startups coming from here. We can also see that tokens like BTC are widely accepted in shops, restaurants, and other businesses. On the other hand, the gambling industry provides another interesting example of how cryptocurrencies are being integrated into everyday digital services. Many online casinos now accept crypto payments, allowing players to deposit, wager, and withdraw funds using their preferred tokens. This casino with online crypto slots shows how digital currencies can now be used to play traditional gambling games, including themed crypto slots.
Bitcoin isn’t the only coin that’s accepted in this casino, as others such as Bitcoin Cash (BCH), Ethereum (ETH), and Litecoin (LTC) can also be used. This means that players get a fast and secure transfer over the blockchain that makes deposits and withdrawals easier. It’s also added to the privacy of online gambling, with no need to link a bank account or credit card to the casino account since payments are made to and from a crypto wallet.
The CBDC Alternative
While moving any country’s money directly to a decentralized currency might seem challenging, the option of switching to a central bank digital currency (CBDC) could prove to be an attractive alternative. This is a token that is like a digital version of the country’s fiat currency, giving some of the advantages of existing cryptos without the central bank having to give up so much control.
It’s been confirmed that the Argentine central bank has been looking at ways to introduce a digital peso. In fact, a majority of Latin American countries are said to be considering whether to launch their own CBDC, with many of them already carrying out research to find out the best way forward.
The switch to a CBDC in Argentina isn’t guaranteed, as there are plenty of pros and cons to consider along the way. While some people see it as the best way to introduce digital assets and tokenization to the country, others are wary of the possibility of losing the freedom and flexibility currently offered by Bitcoin and other decentralized currencies.
Among the key benefits stated for CBDCs are greater financial inclusion and a simpler payment system that meets modern needs. However, with many Argentines already solving these issues through the use of Bitcoin and other tokens, it remains to be seen whether the public is happy to switch to a digital peso.
Summary and the Way Ahead
Despite the massive strides taken by cryptos in recent years, it’s still difficult to imagine the situation in which Argentina moves fully toward a crypto-only financial system. Yet, it’s a lot easier to imagine a future in which the leading cryptos play a bigger part in our lives, alongside some sort of fiat alternative that could be digital as well as physical.