Argentina – reeling from an unstable currency
and high inflation -- leads Latin America in merchants that accept Bitcoins.
BUENOS AIRES, ARGENTINA -- As central bankers, tech nerds
and law enforcement alike debate its implications, the enigmatic Bitcoin seems
to be catching on – and almost to have been designed with countries like
Argentina in mind.
Economic history has taught Argentines and many other
Latin Americans not to trust their currency or banks. Bouts of inflation and
hyperinflation have devoured Argentines’ savings and, during the country’s 2001
financial crisis, many Argentines had their savings seized completely.
As a result Argentines have traditionally stored money in
alternative instruments under their control. Wealthier Argentines have often
invested in real estate or sent money abroad, while those with less to save
usually exchanged their pesos for dollars and stored them under mattresses and
in freezer boxes.
In late 2011, Argentina’s international reserves began to
dwindle and the government tacitly banned the purchase of foreign currency. [Despite
a liberalization of restrictions last week] it is [still difficult] for
Argentine citizens to buy dollars for saving purposes or to send money abroad
legally. Instead, many buy dollars in the black market at 70 percent premiums
and use specialty exchange houses to make foreign transfers also at the black
A SAFER WAY
Enter Bitcoin. Many see the digital currency as a safer,
more efficient way to deal with Argentina’s draconian restrictions.
JP Theriot, an Argentine-American entrepreneur who has recently
started investing in a company aimed at eliminating Bitcoin volatility,
explains: “Bitcoin essentially erases the government’s ability to use currency
restrictions to manipulate the populace, or worse, grab existing funds and use
them for political purposes.”
Serrano, the Argentine co-founder of BitPagos, Latin America’s first
Bitcoin payment gateway: “It allows you the opportunity to be your own bank.
For Argentines that is very attractive.”
Casares, one of the pioneers in bringing the
Internet to Argentina and a self-professed Bitcoin fanatic, maintains that
people from Argentina and the developing world are more likely to understand
and accept Bitcoin than in the United States and Europe. “They don’t understand
the need for an alternative, whereas those in Argentina do,” he says.
The last time Casares was in Buenos Aires, he decided to
sell a few Bitcoins to see who in Argentina was adopting them. When he arrived
at a Starbucks restaurant to meet his buyer, he was surprised to find a retired
“This is an experiment,” he warned the man. “Don’t put
all of your savings in Bitcoin.” But the retiree’s response was: “I’ve already
lost everything once. What else should I put it in?” Casares says that day he
sold the man $40,000 worth of bitcoins that would now be worth more than $2
Argentines are also less wary of Bitcoin’s association
with unsavory interests and financial chicanery arising from its use on the
online drug retailer SilkRoad.
Argentina is a cash-based economy where tax evasion and
money laundering are already rampant. Cash, much more than digital currency, is
the most suspicious tender for Argentines – though it is ubiquitously used.
In spite of Argentines’ relative tolerance of less than
transparent financial transactions, there are barriers to Bitcoin’s future
growth. First, it is not yet a practical form of payment. As everywhere else in
the world, only a niche population has begun to transact in Bitcoin.
According to CoinMap, just 92 businesses including
restaurants, hotels, and a lone orthodontist have begun to accept bitcoins in
the country. That said, 92 businesses is far more than in many other Latin
American countries – Brazil has only 28 Bitcoin businesses, Mexico has only 24,
Colombia 11, and Chile 10. Certain Internet firms such as Overstock.com have
begun accepting bitcoins as payment, but Argentines are limited to $25 in
purchases a year from online foreign retailers.
Bitcoins are also harder to come by for Argentines
without an external bank account. Since international bank transfers are
restricted by the Central Bank, Argentines without bank accounts abroad are
limited to buying Bitcoins from other Argentines.
Mining – the process of producing virtual currencies,
where computers solve mathematical equations and are rewarded with coins – is
also fairly rare. Serrano estimates that only 300 people are able to mine in
Buenos Aires. The hardware needed is not produced in Argentina and the
government strictly controls imports.
Finally, Argentines share the concerns expressed by all
potential Bitcoin users – that the currency is volatile, that it is susceptible
to hacking, and that its anonymity allows people with dubious interests to
Bitcoin fans insist that those problems will be resolved
quickly. They compare Bitcoin to Napster and insist that even if it does fail,
it has already begun to usher in a new era in finance, as Napster did for the
music and entertainment industries.
Digital currency, they insist, will ultimately become
like “email for money”. Meanwhile, however, Bitcoin is just starting to find
its feet with a small minority both in Argentina and the world.
with permission from Tenacitas International.