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Bitcoin Is Disrupting the Argentine Economy
HughPickens.com writes: Nathaniel Popper writes in the NYT that with its volatile currency and dysfunctional banks, Argentina is the perfect place to experiment with a new digital currency. The number of Bitcoin users in Argentina is relatively small; it barely registers on most charts of global Bitcoin usage. But Argentina has been quietly gaining renown in technology circles as the first, and almost only, place where Bitcoins are being regularly used by ordinary people for real commercial transactions. For example, BitPagos is selling bitcoins in over 8,000 Argentine convenience stores and is helping more than 200 hotels, both cheap and boutique, take credit-card payments from foreign tourists. The money brought to Argentina using Bitcoin circumvents the onerous government restrictions on receiving money from abroad
The Rock Hostel is one of hundreds of hotels in the country using BitPagos to collect credit-card payments from foreign customers. If owner Rodriguez Pons accepted credit-card payments from American customers through the usual financial channels, customers would be billed in dollars, and when those dollars came to Pons's Argentine bank account, they would be converted at the official rate, about 30 percent lower than the black-market rate. It would also take 20 days for Pons to get her pesos. BitPagos helped counter these drawbacks by taking the credit-card payment in the United States and then using the dollars to buy Bitcoins, generally from Coinbase, before sending them to Pons immediately.
Bitcoin proponents like to say that the currency first became popular in the places that needed it least, like Europe and the United States, given how smoothly the currencies and financial services work there. It makes sense that a place like Argentina would be fertile ground for a virtual currency. Inflation is constant: At the end of 2014, for example, the peso was worth 25 percent less than it was at the beginning of the year. And that adversity pales in comparison with past bouts of hyperinflation, defaults on national debts and currency revaluations. "In the long run, Bitcoin will be very disruptive to the developed world," says Dan Morehead, a former Goldman Sachs executive who now runs a hedge fund focused on Bitcoin. Things are happening sooner in Argentina, he says, because its financial system creates hassles for the people there. But, he added, "Argentina is just a more extreme example of the situation in every country."
The Rock Hostel is one of hundreds of hotels in the country using BitPagos to collect credit-card payments from foreign customers. If owner Rodriguez Pons accepted credit-card payments from American customers through the usual financial channels, customers would be billed in dollars, and when those dollars came to Pons's Argentine bank account, they would be converted at the official rate, about 30 percent lower than the black-market rate. It would also take 20 days for Pons to get her pesos. BitPagos helped counter these drawbacks by taking the credit-card payment in the United States and then using the dollars to buy Bitcoins, generally from Coinbase, before sending them to Pons immediately.
Bitcoin proponents like to say that the currency first became popular in the places that needed it least, like Europe and the United States, given how smoothly the currencies and financial services work there. It makes sense that a place like Argentina would be fertile ground for a virtual currency. Inflation is constant: At the end of 2014, for example, the peso was worth 25 percent less than it was at the beginning of the year. And that adversity pales in comparison with past bouts of hyperinflation, defaults on national debts and currency revaluations. "In the long run, Bitcoin will be very disruptive to the developed world," says Dan Morehead, a former Goldman Sachs executive who now runs a hedge fund focused on Bitcoin. Things are happening sooner in Argentina, he says, because its financial system creates hassles for the people there. But, he added, "Argentina is just a more extreme example of the situation in every country."
As usual, if you can't understand that you can't screw your users without losing them, you merit losing ground to new technologies.
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The Argentine economy has hyperinflation and unreasonably burdensome government controls. Bitcoin hasn't "disrupted" the Argentine economy, it has made daily life possible for the average Argentinian.
Yes, from the perspective of the government, Bitcoin has made their self-destructive policies moot. It has given the populace an alternative to their collapsing fiat currency. Fortunately, however, the government doesn't get to define "the economy" - The participants in the economy do, and Argentinians have said "no thanks!" to the local Peso.
Argentina doesn't highlight the problems with Bitcoin, it exemplifies the entire raison d'etre for it!
They've hardly missed the boat. If Bitcoin really disrupts things in Argentina, then that means Argentinians holding Bitcoins instead of holding pesos or dollars. That would imply they hold a number of Bitcoins worth some vaguely similar amount to what their current cash holdings are worth. Given that there are about $50B USD worth of pesos, and only $3B USD worth of Bitcoins, then either the price goes up a bunch or Bitcoin isn't actually being all that disruptive.
Bitcoin stability only needs to be measured in days. All that's needed is enough time to bill someone in currency x and redeem it in currency z. It's primary function is to keep banks and governments out of the transaction.
That would imply they hold a number of Bitcoins worth some vaguely similar amount to what their current cash holdings are worth.
No it would not. Bitcoin would need to be a reliable store of value for the above to be true. And "store of value" is the currency characteristic where bitcoin fails the hardest.
Bitcoin is very useful as a payment technology. But holding bitcoins is an absolute risk. Which is why most merchants who accept bitcoins for payment never actually see or touch a bitcoin. Their merchant exchange immediately converts to fiat upon receipt and the merchant receives only this fiat currency.
Now could the Argentine Peso also be a poor store of value, thats plausible. The US Dollar or Euro, these are likely to be reasonable stores of value. Going from one risky to another risky, peso to bitcoin, does not make sense compared to going peso to dollar or euro, unless people are prevented from doing so. If prevented from going to dollar or euro then a move to bitcoin would seem more an act of desperation.
People want to know why the rich keep getting richer? It is because they don't deal in currency, they deal in assets. Currency is only used when converting one asset for another. Most Currency is inflationary, meaning if you hold it, you lose. This is such a little known fact of life. BitCoin, should it survive will ultimately be deflationary currency, meaning it gains value the longer you hold it.
Think of it this way, you work hard, when you're young, you can retire if you save anything, because deflationary currency becomes an asset. But that doesn't bode well for the rich n powerful, or politicians who need a dependent class of people to take care of.
Agent K: A *person* is smart. People are dumb, stupid, panicky animals, and you know it.
"..which, from TFA it is - an act of economic desperation."
And blatantly illegal. From TFA (note is mine): "The money brought to Argentina using Bitcoin circumvents the onerous government restrictions on receiving money from abroad"
So what they found is that it's easier for Argentinians -at least some of them, to support a black market on bitcoins than dollars (which has been the standard in the past).
"I think it's more of a damning comment on Argentinian currency"
Not so much about Argentinian currency as Argentinian economy (which the former is tied to).