Cryptocurrencies stumble, but in Argentina they are still a safer bet

Amid inflation and the collapse of the peso, many Argentines find cryptocurrencies a less risky option, even despite their recent difficulties.

BUENOS AIRES — Romina Sejas’ entry into the world of cryptocurrencies — in a country where the popularity of digital currencies has skyrocketed despite their volatility — began with a pizza.

A few years ago, I was helping to prepare pizza dough at a friend’s house on the outskirts of Mendoza, a medium-sized city in western Argentina. The friend suggested fermenting the dough in his mine. “He reconfused Me,” Sejas said. “I thought of mining and I imagined men with helmets and pickaxes.”

Instead, he opened a door that led into a room stacked with shelves of buzzing computers. Known as miners in tech parlance, computers work nonstop, verifying cryptocurrency transactions and rewarding their owners in digital currency. They consume so much energy that the room was a functional oven.

Sejas’ friend explained that entering the world of cryptocurrencies had increased his monthly salary by almost 40 percent, going from $800 doing odd jobs to $1,100.

Sejas soon became a believer in cryptocurrencies, joining a wave of Argentines turning to digital currencies as a way to earn more, increase their savings and even do business.

Although the cryptocurrency market has crumbled in recent months, many Argentines see it as a safe haven in a country where rising inflation and economic crisis have hit the national currency, the peso, and the bank accounts of the people.

“Money here is like ice cream,” said Marcos Buscaglia, an economist in Buenos Aires, the capital. “If you keep a peso for a long time, it melts away as far as what you can buy with it.”

Because so few Argentines trust the peso, they prefer to save in other currencies, including dollars.

About a third of Argentines believe savings kept in pesos at a local bank will hold their value for two years, the lowest percentage among respondents from 15 countries interviewed in June by Morning Consult, a Washington-based data firm. .

Almost 60 percent of Argentines believed that bitcoin, one of the most popular cryptocurrencies, would maintain the value of their savings during that same period, according to the survey.

With inflation expected to hit 90 percent in December, the value of the peso continues to fall, driving up the prices of everyday products, from toilet paper to tuna, making it virtually impossible to save.

Current global supply chain problems and the war in Ukraine have contributed to rising prices, but many economists blame Argentina’s woes on years of excessive government spending. Since the government does not collect enough to make up the deficit, the central bank prints pesos, causing inflation to rise even more.

Now, many Argentines are turning to cryptocurrencies as a way to escape the peso. About a third of Argentines said they bought or sold cryptocurrency at least once a month, twice as many as in the United States, according to an independent survey by Morning Consult.

But cryptocurrency, given its instability, also carries risks.

Vicente Cappelletti, 26, said he had lost about $1,000, about 10 percent of his savings, when TerraUSD, one of the so-called stablecoins — a type of cryptocurrency that can be pegged to government currencies such as the dollar — crashed in May.

Cappelletti, an industrial engineer, said it was easy to lose money “if you are not in this all the time and updated with information.” He sold all the savings he had in cryptocurrencies for pesos and put them in a traditional investment fund.

Pablo Sabatella, who runs an organization in Buenos Aires that offers cryptocurrency classes, said he had been contacted by hundreds of people in the days after Terra imploded, desperate to get their money back.

“Most don’t know what they’re doing,” he said.

Bitcoin’s value has fallen from $65,000 in November to around $24,000 today, almost double the drop in the value of the peso. But many Argentines believe that, unlike the peso, cryptocurrencies will recover.

For others, however, cryptocurrencies have brought financial benefits that come in handy.

Sejas, who has worked as a waitress and in telemarketing, makes a living as a cryptocurrency consultant and teaching workshops on digital currencies. She runs an online marketplace with 7,000 members who can use crypto to buy almost anything from hiking boots to a house.

Sejas grew up in a working-class family with no internet access. Her parents did not finish high school nor did they have bank accounts. “We measured even the toilet paper we had because we had very little back then,” she says.

The money he has earned from cryptocurrencies has transformed his life. “I am studying law at a private university,” she said. “I’ve done all the medical checkups I never did as a kid.”

Around the world, people in emerging and low-income countries have become the largest users of cryptocurrencies, according to various reports, surpassing the United States and Europe.

Digital currencies are appreciated in countries where local money is volatile and where governments have made it difficult for citizens to purchase foreign currency.

Two poor countries, El Salvador and the Central African Republic, have gone even further: they adopted Bitcoin as another official national currency, although the bet has not paid off in El Salvador, and it is too early to tell if it will in the Central African Republic. .

Argentina offers some clues about the appeal of cryptocurrencies.

Argentines have long turned to the dollar as a safe haven. Saving in dollars “is engraved in our DNA,” said Daniel Convertini, 34, who works in communications for a transportation company. “I learned it from my dad and my grandfather, not because I read it in a financial newspaper.”

Argentines are believed to have more dollars in cash or in foreign financial institutions than almost any other population apart from Americans, said Gian Maria Milesi-Ferretti, an economist at the Brookings Institution.

But three years ago, the Argentine government made it difficult to buy US currency. Argentines can only legally buy $200 a month and have to pay heavy taxes on each transaction.

Instead, many people have turned to the black market for dollars, and the streets of downtown Buenos Aires are full of moneychangers whispering their conversion rates to passersby.

But digital currencies offer the advantage of not having to lug around large banknote reserves.

“We offered a hack to the stocks by selling crypto dollars,” said Julián Fraiese, one of the founders of Buenbit, an Argentine cryptocurrency exchange that focuses on dollar -pegged stablecoins . The company said it had added 200,000 users in the seven months after government controls on dollars tightened in 2019.

Ismael Loyo, a 34-year-old taxi driver who moved from Venezuela to Argentina in 2018, turned to cryptocurrency after seeing the peso rapidly devalued, a repeat of what he had experienced back home. As soon as he gets paid, he connects to an online exchange and buys cryptocurrencies.

Aware of the ups and downs of the digital currency market, he explains that he is leaving a currency “that only devalues” and entering a currency that, although volatile, “allows the value to be maintained over time and increased.”

To people like Loyo, who has lived in two countries plagued by high inflation, bitcoin seems less like a speculative gamble than a necessity. “Maybe, being in another country, I wouldn’t have had the need to investigate why to do this,” he said.

Still, the decline in the value of cryptocurrencies has wreaked havoc, and concerns about its risks prompted increased regulatory scrutiny.

Buenbit recently laid off almost half of its employees, and days after two Argentine banks began giving their customers the option to buy and sell cryptocurrencies, the country’s Central Bank banned such services.

But since many Argentines have so little faith in their government’s management of the economy, cryptocurrencies, despite their turmoil, remain in high demand.

More workers in Argentina than in any other country, including many freelancers in jobs like software development and translation, choose to receive part of their pay in cryptocurrency, according to Deel, a payroll company employed by 100,000 freelancers in 150 nations.

“Technology is the language of the world to come,” said Fabián Báez, a priest who helps organize technology classes in a popular neighborhood in Buenos Aires, teaching, among other things, how to open a digital wallet. to start collecting cryptocurrencies.

In Buenos Aires, public bus billboards entice people with promises of high returns in stablecoins . Inside a busy subway station, an ad promotes: “Beat inflation. Buy bitcoin.”

“I prefer to take the risk of crypto,” said Convertini, an employee of the transportation company, “rather than the risk of the Argentine state.”

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