Argentineans Turn to Underground 'Crypto Caves' to Beat Inflation and Currency Controls
Summary:
Argentines are resorting to covert exchanges, known as "crypto caves," to buy U.S. dollar stablecoins in a bid to navigate strict currency controls and the triple-digit inflation of the national currency, the Argentine peso. Amid a volatile economic environment, these secret peer-to-peer exchanges provide better rates than the official ones, allowing Argentinians to maintain the value of their assets. Although Bitcoin has been legalized as a payment method in the country, Argentinians still hesitate to use it due to the high inflation and prefer stablecoins like USDT. With incoming changes in leadership and economic policies, the future of these "crypto caves" remains uncertain.
Argentines are resorting to illicit exchanges, colloquially known as "crypto caves," to purchase U.S. dollar stablecoins in an effort to evade stringent currency rules and the Argentine peso's (ARS) soaring inflation. In the process, they're primarily sidestepping Bitcoin (BTC) due to its perceived instability. These crypto caves are concealed peer-to-peer exchanges operating clandestinely in unnoticeable locations, according to Guillermo Escudero, CryptoMarket's manager of strategic partnerships.
The exchange rates offered by these crypto caves are generally better than the country's official rate, he added. Since local banks cannot officially hold dollars, Argentinians have turned to crypto wallets as a means to safeguard dollar-linked stablecoins such as Tether (USDT). Having the option to store wealth in 'digital dollars' allows the Argentineans to maintain their purchasing power despite the depreciation of the ARS, said Ramiero Raposo, the vice president of crypto payroll firm Bitwage.
Crypto caves originally evolved from “financial caves," establishments that were public money exchanges but went underground after the government implemented currency controls in the 1980s. Consequently,the "blue dollar" emerged as an informal exchange rate providing locals 1,115 ARS for $1. As of last December, the standard exchange rate was approximately 365 ARS to a dollar but has since risen to 829 ARS following the appointment of economist Javier Milei as president. With the nation's inflation rate hitting a 32-year peak at 211.4% in 2023, crypto caves have become an important resource for Argentinians looking to convert their rapidly depreciating pesos.
However, under Milei's leadership, the existing currency restrictions are projected to be a thing of the past, potentially dampening the demand for these hidden exchanges. Notwithstanding this, high tax pressures could still sustain a 'black market' operating away from the state's attention. Places like Cuba, Venezuela, Iran, and several African nations also have their versions of these crypto caves.
Despite legalizing Bitcoin as a payment method for contracts as part of Milei's promise to modernize the economy, most Argentinians still find it unwise to agree to contracts in Bitcoin considering the nation's escalating inflation. According to CryptoMarket’s CEO María Fernanda Juppet, the transaction will inevitably have to convert into Argentine pesos, exacerbating the volatility that comes with daily price fluctuations of over 10%. Argentinians generally prefer using USDT on the Tron network to reduce the number of conversions needed.
Published At
2/12/2024 7:15:53 AM
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