This article was written by Adam Dubove, who is a columnist, consultant and popularizer about Bitcoin. He is co-founder and director of Ichimoku Fibonacci, an online company focused on financial advice.
I’m a bitcoiner and when I hear about dollarization in Argentina I can’t help but smile.
Although there are still months to go before the presidential campaign in Argentina officially begins, politicians have been parading through television sets in electoral mode for some time. Few proposals have been heard so far, but there was one that stood out from the rest, captured the interest of the people and the media and is the most debated: dollarization. Argentines want dollars, they always did, the meme would say.
It is an undeniable reality. In Argentine pesos it is impossible to save, the peso is not used to express prices because it loses purchasing power every day, and it is very uncomfortable to transact. In Argentina, each commercial operation with cash generates scenes typical of a drug movie: money transported in paper bags, backpacks or travel bags, depending on the magnitude of what is going to be bought. Economic life in Argentina resembles that of Tony Montana in Scarfaceonly with worthless bills.
For all this, the presidential candidate Javier Milei did not have to do much for his dollarization proposal to catch on in the debate and occupy a preponderant place in the political discussion. Annual inflation of 108% during the last 12 months and 32% so far in 2023 is reason enough to seriously consider a radical change in monetary policy.
It seemed unthinkable a few years ago, but today, dollarization has popular support, mainly among the youngest. According to one Opinaia consultancy surveyAmong young people between the ages of 16 and 25, dollarization has 46% support, and 35% support among those between 26 and 35 years of age. On the other hand, after the age of 50, support for dollarization drops to 25% of those surveyed.
as a bitcoiner, the mere mention of dollarization and its growing support makes me smile.
From a practical point of view, dollarization is positive. The dollar’s woes are well known to anyone who has read a worthwhile introduction to Bitcoin. But next to the Argentine peso, the dollar is “hard money”.
The Argentine governments destroyed five monetary signs in less than 55 years; In the last 60 years, the Argentine currency has had an average annual inflation of more than 100% vs. 3.8% of the dollar. The dollar lost 98% of its purchasing power since 1971, 52 years ago, the Argentine peso lost purchasing power by the same amount, in percentage terms, but in just 20 years.
Against this background, the characteristics that Argentines see in dollars are similar to those of Bitcoin. Argentines are looking for money that cannot be inflated by the Central Bank, but at the same time they are looking for money that is practical to store outside the reach of governments, and especially the Argentine one, which has a history of being excessively attracted to what belongs to others. Argentines want to be able to put their savings under the mattress of the bed, and that they do not lose value in a fleeting way as happens with the Argentine peso. An uncomfortable practice, and financially inconvenient, but very common in Argentina.
Certainly, in relative terms, The dollar is a better quality money than the Argentine peso. That is not to say that the US dollar is good quality money, but compared to the Argentine currency it is. Due to the behavior of local politicians and central bankers, the possibility of delegating, once again, the administration of the currency and monetary policy of Argentina to the Federal Reserve is now being discussed in Argentina.
I insist, bitcoiners should smile when we hear this debate. It is not every day that we see a country repudiate its own currency. The rejection of the state monopoly on money weakens one of the pillars of the state creed, the ability to make money and loot through issuance. It is clear that the problem is the quality of the money and the honesty of its issuer.
Bitcoin in post-dollarization Argentina
A dollarization in Argentina is good for Bitcoin. Although it is not yet clear which method Milei will choose to implement dollarization, if he becomes president, he has indicated that his dollarization project will be accompanied by a project of monetary freedom and “currency competition,” the latter concept also adopted by other candidates.
A currency free competition law could include bitcoin within the alternatives achieved by “monetary freedom”. What does this mean? That bitcoin would be considered a currency by Argentine law and not as a digital assetas it currently is, and therefore its tax treatment would be much more favorable.
However, the most positive aspect is that once the Argentine peso is out of the way, Argentines will be closer to understanding that the US currency is not a panacea or a haven of value for the long term. After all, the dollar is also wallpaper, only in this case the American painter is not as drunk as the one from the River Plate.
The dollar is the calm before the storm.
Disclaimer: The views and opinions expressed in this article belong to its author and do not necessarily reflect those of CriptoNoticias.