In the last weeks a lot of information emerged reporting the many benefits of cryptoassets as a hedge against inflation and as an instrument to calm the foreign-exchange market. This article comprises the most relevant reports on this issue concluding with our opinion.
From my point of view, the debate lacks depth considering that the lecturers are more politicians rather than technicians. Anyway, the fact that cryptoassets appear on the newspapers headlines and news portals is quite positive as well as their inclusion in the political agenda (unbelievable two years ago).
In an informal interview with FiloNews, the President of Argentina commented on this matter. Among other concepts, he said that a digital currency (different from cryptocurrency) was “possible” for the benefits involved. “Perhaps it is a good path to take. It could be beneficial for us as a hedge against inflation since it is a hard currency” and “perhaps we could follow El Salvador’s steps towards the adoption of a digital currency as legal tender.”
The many misconceptions regarding what cryptocurrencies are and the uses they have, arose all sort of reactions. He also commented as follows: “They say the advantage is that the inflationary effect is largely nullified. It is also said that many frauds have been reported with the use of cryptocurrencies, creating uncertain market conditions.” He also reported: “I must confess this is a topic that I approach with caution. In my case, there is caution because it is unfamiliar to me and because it is hard to understand how this fortune materializes. Many people in the world share my concerns, reason why the crypto ecosystem has not fully expanded all over the world.” Finally, he reported: “I support any action towards bancarization and State-related banking and financial activities.” Summing up, some positive aspects to remark: the reference to cryptoassets, to be aware of the unfamiliarity with the matter, to be cautious in his comments and to be open to consider many tech-related options. The negative aspects: the lack of technical notions (even though commented in an intimate/informal interview) and the many mistakes incurred in a two-minutes report (some mistakes partly shared with the reporter, being unable to distinguish between cryptocurrencies and digital currencies).
Perhaps the best summary of the main political actors’ opinions is reflected in this article by Infobae. Only 24 hours before the interview, the President of the Central Bank (Pesce) reported that Bitcoin “does not generate any value” and “may mislead to misinformed people”, disregarding as well its connection with the foreign-exchange market. Besides my disagreement with the economist’s opinion, his comments are clearly confusing regarding the Government’s position towards cryptocurrencies (to such an extent that it is not clear if it supports or rejects crypto or if it is a combination of both) as clearly shown in this article. I assume this mid-position can be connected with the struggle between the traditional banking system and the FinTech ecosystem.
Some economists of the opposite political party (Tetaz and Lousteau) made some ironic references to a “digital cuasi-currency” (“PataCoin”) as a clear reference to the Patacones and other provincial bonds that were used as cuasi-currencies for some years after the 2001 crisis. They also supported crypto as a hedge against inflation and the idea to smooth money-printing to mitigate inflation as well.
There are many inconsistencies in the economic academic arena between economists’ declarations and how crypto really works. They lack deep knowledge and investigation in monetary and economic theories and disregard the down-trend in pesos demand that could evolve towards a quick and easy access to cryptocurrencies (more attractive than our fiat currency).
From the technical point of view, one of the most ruthless critics were reported by Roberto Cachanosky in his editorial for Infobae. If you like an economic/financial analysis of the relationship between cryptoassets and legal currencies, I strongly recommend it.
Rodolfo Andragnes (Bitcoin Argentina and LaBitConf), a re-known expert in this field, participated in the debate in an interview for Criptonoticias. He believes it is unlikely for a nation with such huge paper-money printing (to weather its crisis) to boost the adoption of assets totally out of its control. He also made a distinction (technical but essential) based on the fact that, in spite of the deflationary characteristics of many currencies, it does not mean that, if used here in Argentina the peso could turn into a deflationary currency as well.
Implementation is the key element in Andragnes’ opinion. I think Argentina will not “relegate monetary sovereignty” and the absence of a strategic plan designed for peso deflation using a cryptocurrency will throw the President’s declarations overboard.
One of the best articles I read on this topic (with a more balanced vision and from other perspective) was the interview to Lucas Llach (ex Vice-President of the Central Bank of the Argentine Republic) made by Natalia Foletti for iProUp with an interesting vision of how companies like Mercado Libre and Ualá can mitigate inflation. The economist advises on the damages over-regulation may cause in the market if there is too much control on pesos to crypto transactions: any obstacle to assets interaction is a serious threat for crypto adoption (and, if not adopted, the benefits of these technologies are lost).
Llach sticks to the idea that crypto could be a good instrument to mitigate inflation on condition that “they are not disturbed.” A massive crypto adoption, given their decentralized nature, could diminish Central Bank omnipotence regarding currency value. If you missed this article, I recommend to enter the link. Llach tweeted something quite interesting: “if ONE crypto (preferably one connected to regional currencies and out of Government control) is allowed for payment of taxes and wages, inflation could be over in one month.”
We hope you enjoyed this article (and connected links) for a better comprehension of the crypto sphere within the Argentine political agenda.
Diego J. Nunes
Lawyer
Estudio Nunes & Asoc.