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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."
Losing 25% year on year in the Peso looks like kid's stuff in the devaluation game. They need a *real* currency to lock in year on year decreases of more than 50%. And that's why they've turned to Bitcoin!
4/15/2014 = $496
4/15/2015 = $223
It's not as fun as lighting cigars with $100 bills, but it's just as productive!
Is it just my observation, or are there way too many stupid people in the world?
"But Argentina has been quietly gaining renown[...]" No kidding... Ill say "extremely quietly". As a tech savvy Argentinean that has been living in Argentina for the last 33 years (that is all my life), I never heard of BitPagos, Rock Hostel or all those 8000 convenience stores apparently accepting BitCoins. I guess I should really get out more. The inflation is real though. And it sucks.
"I'm from Buenos Aires, and I say kill 'em all!"
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 Is Disrupting the Argentine Economy
The number of Bitcoin users in Argentina is relatively small; it barely registers on most charts of global Bitcoin usage.
So it's disrupting the Argentine Economy... but only in a way that's so small as to be imperceptible. Gotcha.
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.
..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.
Who put this thing together? Me, that's who.
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.
Their currency loses 25% per year ...
Bitcoin recently lost 75% in a year.
Argentina already went through this headache when the US Dollar became the defacto standard
Tying the peso to the dollar was a good policy, and gave Argentina a huge opportunity to borrow at much lower costs to invest for the future. Instead they went deep into debt while squandering the money on unaffordable social programs and cheap imports. Much like what Greece did when they switched to the euro. But, unlike Greece, nobody is willing to give Argentina a bail out.
I live in Argentina and I haven't heard of any of this. Neiher BitPagos, nor any of the other things mentioned above. Here in Argentina bitcoins are, like most enywhere else, a marginal things only some nerds know.
"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?