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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."
If governments keep pushing laws that have nothing to do with justice, in the end they can only get civil wars.
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Technological marvel and portent of things to come or not, it's really quite sad that Argentina's is so messed up that it makes Bitcoin look good.
Don't cry for me, Argentina, cry for yourselves.
The World Wide Web is dying. Soon, we shall have only the Internet.
Argentina already went through this headache when the US Dollar became the defacto standard for awhile while the Argentine Peso was pegged by law to the US Dollar and contracts were drafted using the Dollar, not the Peso, as the unit of currency. This became a problem when Argentina wanted to decouple from the Dollar; it meant that Argentines, earning money in Pesos, would be entirely dependent on the exchange rate at the moment to pay back their debts. I expect that's why the currency exchange laws were passed, to make the transition back to their own currency and thus their own monetary policy possible.
Bitcoin, if it gets too big, destabilizes this again, as now people do not look to their own national currency, and their already weak national currency grows even weaker. If you want an example of the effects of a nation not being able to control monetary policy, look at Greece as a constituent of the EU; they can't control monetary policy through the usual means (ie, controlling access to new money) so they can't devalue the currency when necessary to keep the economy flowing.
I expect that the laws will be interpreted to mean that Bitcoin users are in violation, or else new laws will be written to force Bitcoin exchange to follow the same rules as any other currency exchange. Argentina has struggled with their money for too long to let something destabilize the government like this.
Do not look into laser with remaining eye.
..which, from TFA it is - an act of economic desperation. Their currency loses 25% per year and trying to convert it to dollars takes time and huge fees - losing roughly 30%. If bitcoin provides a better, faster arbitrage, then it is, in this case, a more "reliable store of value."
I think it's more of a damning comment on Argentinian currency rather than a spotlight on the quality and fungibility of bitcoins.
Or it could be seen also as a spotlight of bitcoins as a tool to preserve wealth in a free-falling economy.
Or it could be seen also as a spotlight of bitcoins as a tool to preserve wealth in a free-falling economy.
In the last year or so bitcoin prices have been in freefall too. Its somewhat stabilized at the moment but bitcoin prices are still speculation driven. One negative policy decision from the Chinese government regarding bitcoin and it could easily be in freefall again.
As a payment method bitcoin is great. But as a store of value its "tulips", at least for now while its dominated by speculators.
As a fellow argentinian I can confirm I've never heard of this bullshit before. There was an a(dve)rticle on Infobae the other day with the same phrasing.
When MercadoPago accepts BTC we can talk.
"Much like what Greece did when they switched to the euro."
Oh, so the problem with Greece was that they "squandered the money on unaffordable social programs and cheap imports", not that a corrupted elite gamed the system in their favour and then got the helpful aid from Goldman Sachs to hide the tracks.
Oh, so the problem with Greece was that they "squandered the money on unaffordable social programs and cheap imports"
Basically, yes. Greeks retire at 60, or even earlier, with generous pensions, and then expect the Germans, who work till 67, to bail them out.
... not that a corrupted elite gamed the system in their favour and then got the helpful aid from Goldman Sachs to hide the tracks.
Nope. The loans from Goldman Sachs were mostly squandered on the same unaffordable social programs, and generous pensions. What happened in Greece should have been obvious to anyone decades before it finally imploded. Do you also believe that "corrupted elite" elected Syriza?
Actually, they got in trouble by *not* printing money, but instead by borrowing. They were working hard to keep inflation down for awhile in the 1990's and that meant that they borrowed to cover their work on building infrastructure. This actually worked fairly well... for awhile.
When the global financial crisis hit in the early 2000's it left Argentina unable to service debts. Argentina had to deal with huge unemployment and political instability. That resulted in the largest default on sovereign debt ever. No bueno.
Argentina is still a "pariah" but was doing a little better until recently. Some people are blaming new populist policies for having put Argentina back in trouble with a shrinking economy again.
Argentina is just chock full of corruption, as well. That means that unless things are peachy keen and there's enough money for everyone, like in the 1990s, people don't want to touch Argentina with a 10 foot pole. That hurts their ability to recover where less corrupt countries might bounce back faster.