Traders of bitcoin in Argentina are no longer supposed to purchase U.S. dollars according to a public announcemeent made on Thursday.
As the country’s economy struggles amid unsustainable expansion of the money supply, many people seek to protect their savings using bitcoin, a digital currency with strict supply cap.
The central bank made publice that it seeks to prohibit those who have bought Bitcoin(BTC) or any other digital asset in the past 90 days with pesos will not be able to access the single free exchange market (Mercado Único y Libre de Cambio—MULC) and buy dollars at the official rate.
The central bank reacted to a growing volume of trades seeking to exit the Argentinan pesos for more stable alternatives such as USD.
The announcement is addressed to all financial institutiions as well as foreign exchange operators within the country. The objective is to prevent capital from leaving jurisdiction, which is more easily done with bitcoin and dollars. If a person or corporation has pesos in their account and uses them to purchase US dollars via a licensed exchange, these funds can subsequently be used to invest in Bitcoin(BTC) or USD stbale coins like USDT or USDC.
Argentina, Latin Americas third largest economy is struggling with the effects of currency debasement caused by excessive increase in the money supply. At present, the inflation rate is estimated to be at 64% which makes Argentina experience the second0-highest inflation rate in Latin America, after crisis-stricken Venezuela, which has the highest inflation rate in the world.
Argentina, A History Of Economic Failure
From 1930 to 2014, Argentina has encountered many setbacks. Despite its potent economy and natural resources, Argentina’s history is marked by economic failure, default and hyperinflation events.
In 1930 the Great Depression shocked the Argentinian economy, as exports to Europe and the US dried up.
In 1955 inflation soared to 40 percent while wages plunged. Ensuing labor strikes brought the economy to fall. Agentinia’s military intervened to replace the government.
Between 1930 and 1983, presidents averaged only two years in office while the minister for economic affairs was replaced on a yearly cycle.
Annual inflation surpassed 600 percent in 1976 and the military staged another coup. In the following years, the rising inequality and an explosion in foreign debt kept the country busy.
In 1989 inflation reached an unprecedented 5,000 percent which rendered trade impossible.
In 1990 foreign investment came back as import tariffs were cut and state enterprises were privatized. Inflation was reduced to single digits but as soon as then prime minister Menem left office in 1999, foreign capital rushed out of as quickly as it had come in.
2001 saw unemployment rise to over 20 percent. As a result malnutrition and hunger stroke millions of people in a country that had long been the world’s breadbasket.
Henceforth the economy shrunk by a fifth and the government stopped payment on more than $100 billion in debt, setting the world record for the biggest-ever sovereign default.
Despite being cut off from foreign capital markets ever since, the economy has been on a growth path. While most experts did not expect a recession anywhere near as deep as in 2002, recent economic developments around the world might cause a default once again.
With he rise of bitcoin since 2009, capital controls are no longer possible to enforce. The Bitcoin(BTC) network has settled over 17 Trillion USD worth of BTC last year and adoption is growing. People suffering from inflation are using Bitcoin(BTC) as means to protect their wealth and to move it to safe jurisdictions.
The announcement shows that the central banking system in itself is being disrupted not just by economic challenges but on top by a transformative technology that provides stability and reliability to all.
