Argentinians turn to crypto after economy minister resigns

Argentina’s Economy Minister Martin Guzman announced his resignation on June 3, pushing citizens to seek hedges in crypto and causing the price of Tether to gain 6.6% against the Argentian peso, Bloomberg News reported.

Guzman’s resignation comes at a time when the already high inflation saw a new surge. Following his decision to step down, Guzman addressed President Alberto Fernandez and requested to merge the growing political cleavage so that the next minister did not suffer.

Argentina’s former secretary of finance, Miguel Kiguel, hinted at the gravity of the country’s economic problem and said:

“We don’t know who’s coming, but this will be a very hot potato. Whoever comes is going to have a very complicated time.”

Argentinians on crypto

Argentina is one of the countries with the highest crypto adoption — ranked 10th as of 2022.

High adoption stemmed from the citizens’ decades of distrust of the country’s financial system and high inflation. As of April 2022, Argentina’s inflation rate was 50.7%. At the time, Argentina was placed sixth among the high inflation countries with the most increased crypto adoption, with 1.3 million crypto users, equating to almost 3% of the population.

Currently, inflation lingers around 60%. More than 66% of the population invest in crypto to protect savings against skyrocketing inflation. Founder of digital coin UBI, Santiago Siri, commented on Argentina’s high adoption and said:

“Walking around Buenos Aires it’s as if we’ve accidentally travelled to 2034, even the builders and taxi drivers are saving in crypto,”

Moreover, Argentina’s adoption is not only about investments. With the introduction of the Bitcoin ATMs, citizens also use them for everyday payments. The owner of the CrypStation cafe, Puerto Madero, talked about day-to-day business and said citizens are used to using cryptocurrencies as a form of exchange.

Argentinian government on crypto

The government of Argentina fails to share its citizens’ enthusiasm for crypto. The regulations define cryptocurrencies as:

“digital representation of value that can be digitally traded and functions as a medium of exchange; and/or a unit of account; and/or a store of value, but does not have legal tender status in any jurisdiction.”

While the county doesn’t attain legal status for cryptocurrencies, it considers the profits earned from their sale as ‘income,’ which makes them subject to income taxation.

Argentina’s central bank issued rules in May 2022 to tighten regulations. Under the rules, traditional financial institutions were prohibited from offering crypto-related services, including a crypto wallet and issuing transactions or exchanges. At the time, the country’s largest banks just had launched their crypto services.

The central bank said they ruled out the new restrictions to protect the users from the “risks of crypto to the financial system as a whole.” Regardless, tighter rules didn’t hinder the spread of crypto adoption in the country.