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Bitcoin, Featured

Argentina Adopts Bitcoin as an Official Currency

The Argentine government has accepted Bitcoin as an official currency. This essentially implies that the new government has confirmed and ratified contracts that denominate in Bitcoin. A few months back, President Javier Milei’s election campaign manifesto mentioned the adoption of Bitcoin. With this decision, Argentina has solidified and has undoubtedly become more acceptive of cryptocurrencies. However, what prompted the government to take this decision must be analyzed and described briefly. The article will discuss some of the reasons behind this new decision. 

Economic Crisis of Argentina 

Argentina has been facing an economic crisis for a very long time. In 2022, the debt burden became a major challenge. The former Argentine President Alberto Fernandez secured a deal with the International Monetary Fund (IMF) to restructure $44.5 billion worth of debt. It was a record bailout in 2018. Argentina has failed to pay back debt thrice and faced a serious financial crisis in 2014. 

The Argentine Peso is the national currency of Argentina. The country has devalued its currency by more than 50%. President Javier Milei reduced energy subsidies and canceled many tenders for public work as an integral part of his austerity measures. Despite being a large grain producer, Argentina was suffering from 150% inflation and the rates continue to be very high. The reserves in its central bank are in deep red. Nearly two-fifths of the population are battling poverty. Therefore, it will not be an exaggeration to suggest that the Argentine economy is on its knees. In light of these unfavorable circumstances, the President declared Bitcoin as an official currency.

Potential Benefits of Using Bitcoin as an Official Currency

The decision to declare Bitcoin as an official currency is a well-thought-out one. This is because it may help Argentina to come out from the economic crisis or reduce its severity. 

Decentralized Feature

Decentralization is a major feature of Bitcoin. The Central Bank of the Argentine Republic will play no role in determining its value. The Bitcoin network is distributed into many different computers also called nodes. Therefore, Bitcoin may have more resilience than fiat currencies such as Argentine pesos.

Store of Value

Bitcoin is a store of value and this is the reason some give it the title of ‘digital gold’. This particular trait of Bitcoin can be important for investors because it is important to store value during economic crises. 

Enhanced Security

Bitcoin’s public cryptography feature is secure and this may enhance the confidence of ordinary people of Argentina. Because of decentralization, it is not possible for any centralized authority to manipulate its value. Furthermore, since blockchain technology is used, every minute change is recorded and irreversible.

Fixed Supply

One of the most possible reasons behind adopting Bitcoin as an official currency is that, unlike the Argentine Peso, the government cannot print it whenever it wants. The maximum limit of Bitcoins around the world is fixed at 21 million. This scarcity therefore may help in better stabilization of the Argentine economy. 

Declining Faith in the Argentine Peso

According to a WorldCoin.org article, in 2022, nearly 60% of Argentine respondents said that they trust Bitcoin a lot. Many expressed confidence that it will perform well in 1-2 years. This high degree of optimism in crypto is quite rare. Moreover, the article also states that only 35% of Argentines believed that the Peso would retain its value for 1-2 years. This clearly indicates that people are losing faith in their national fiat currency because of constant devaluation. 

Argentines are also accepting cryptocurrencies such as Bitcoin and Ethereum for their advantages. This is because transferring Pesos into American Dollars is becoming difficult. Thus, they find cryptos cheaper, faster, and more accessible than fiat currencies. Many also avoid the risks of buying American dollars from the black market.

Also Read- Benefits and Opportunities of Decentralized Finance (DeFi)

In Conclusion

Argentina has adopted Bitcoin as an official currency mainly to combat its lingering economic problems. The current attitude of the Argentine government and public is largely favorable towards cryptos such as Bitcoin. This is because many are hoping that the numerous benefits of Bitcoin such as enhanced security features and, store of value can boost the morale of investors. Furthermore, the Argentine Peso’s credibility has suffered a lot and it will take time for people to regain their confidence. Till then, cryptos such as Bitcoin will continue to gain more acceptance and may encourage other countries to take similar measures to adopt it.

 

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