Argentina’s Economic Turmoil Triggers Surge in Stablecoin Adoption

In the midst of an unprecedented economic crisis, Argentina is witnessing a significant migration of its citizens towards stablecoins as a bulwark against the relentless devaluation of the Argentine peso.

This pivot to digital currencies is more than a fleeting trend; it signifies a profound disillusionment with traditional monetary systems and a collective yearning for financial stability amidst persistent market turbulence.

The peso against the USD from 2021 to today.
The peso against the USD from 2021 to today. Source: TradingView.com

Against the USD, the Argentinian peso is down 95% since 2021, including a dramatic devaluation of over 50% in 2023, under the new administration of President Javier Milei, which has only accelerated the country’s transition to digital assets.

Key Takeaways

  • Argentina’s economic crisis has accelerated the adoption of stablecoins, with citizens turning to USDT, USDC, and other digital dollars as a hedge against the peso’s devaluation and rampant inflation.
  • The Argentine government’s drastic devaluation of the peso by over 50% and the country’s soaring inflation rate, which exceeded 200% in 2023, have been key drivers behind the surge in stablecoin adoption.
  • Unlike in other Latin American countries, in Argentina, stablecoins have overtaken Bitcoin in popularity for savings and transactions, accounting for 60% of crypto purchases on platforms like Bitso.
  • The shift towards stablecoins is seen as a strategic move to preserve financial well-being, offering Argentinians a semblance of stability and inclusivity in a turbulent economic landscape.

Argentina’s 2023 Currency Crisis Explained

The Argentine economy, already beleaguered by years of inflation and fiscal mismanagement, reached a critical juncture in 2023 with the government’s announcement of a drastic devaluation of the peso.

This bold strategy, which saw the peso’s value plummet from 400 to over 800 against the US dollar, was deemed essential by President Milei’s economic team to forestall an impending hyperinflation catastrophe.

Alongside the devaluation, a slew of austerity measures — including sweeping subsidy cuts, the cessation of public works projects, and the reduction of government ministries — were introduced in a bid to stabilize the national economy.

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However, these measures came at a steep cost to the Argentine populace, whose purchasing power was halved overnight.

Amidst this economic backdrop, Argentina’s inflation rate has surged past 200%, propelling individuals towards alternative value stores.

Argentina Inflation Rate
Argentina Inflation Rate. Source: TradingEconomics.com, Instituto Nacional De Estadística Y Censos (INDEC)

Enter stablecoin, which are digital currencies pegged to stable assets like the US dollar, and which have emerged as a favored refuge for Argentinians striving to safeguard their assets against the peso’s decline.

The Rise of Stablecoins in Argentina: A Financial Lifeline

The instability of the Argentine currency has prompted a remarkable surge in stablecoin adoption.

According to Bitso, one of Latin America’s leading cryptocurrency platforms, 60% of crypto transactions in Argentina were dominated by dollar-pegged stablecoins such as USDT and USDC.

This marks a stark contrast to the rest of Latin America, where Bitcoin (BTC) continues to dominate the digital currency market, according to Chainalysis research.

The allure of stablecoins lies in their perceived safety and ability to hedge against inflation and currency devaluation, giving citizens global and digital access to the USD — which itself finds itself struggling against inflation, but nothing like the scale that has plagued various countries in Latin America over the last few decades.

So, for many Argentinians, converting their increasingly worthless pesos into a digital currency that retains a stable value has become a strategy for preserving their financial well-being.

Significance of Stablecoins in Latin American Remittance Market

Beyond personal wealth preservation, stablecoins are revolutionizing the remittance sector in Latin America — allowing family members in countries such as the US to send money overseas.

Traditional remittance channels, plagued by high fees and lengthy processing times, are being supplanted by stablecoins, offering a more economical and expedient means for cross-border money transfers.

This development is especially pertinent for Argentina, where economic distress has propelled a significant portion of the population to seek employment abroad, relying on remittances as a critical financial lifeline for their families back home.

The remittance grew by 25% in 2021 and a further 11% in 2022, valued at $145 billion, and then grew a further 8% to $156 billion in 2023.

The increasing reliance on stablecoins for remittances underscores their potential to facilitate financial inclusion and economic stability in regions afflicted by currency volatility and inflation.

Contextualizing Argentina’s Economic Measures

The Argentine government’s economic overhaul, while aimed at averting a total financial collapse, has elicited widespread criticism and concern, particularly regarding its impact on the country’s most vulnerable sectors.

The IMF’s endorsement of these austerity measures has further ignited debate over the role of international financial institutions in shaping domestic economic policies.

As Argentina grapples with these formidable economic challenges, the rise of stablecoins as a means of financial safeguard and remittance facilitator offers a glimpse into the transformative potential of digital currencies in providing alternatives to conventional financial systems.

Argentina leads the chart for stablecurrencies received in one year to July 2023.
Argentina leads the chart for stablecurrencies received in one year to July 2023. Source: Chainalysis
Stablecoins lead the way for remittance across many LATAM countries, as opposed to volatile cryptocurrencies.
Stablecoins lead the way for remittance across many LATAM countries, as opposed to volatile cryptocurrencies. Source: Chainalysis

Stablecoins lead the way for remittance across many LATAM countries, as opposed to volatile cryptocurrencies. Source: Chainalysis

This shift towards stablecoins not only reflects the Argentine public’s search for financial stability but also signals a broader global trend towards the adoption of digital assets in response to economic instability.

Opinion: Marcos Nunes of Gnosis Pay on Argentina’s Shift to Stablecoins

In response to the escalating demand for stablecoins in Argentina, Marcos Nunes, CEO of Gnosis Pay sat down for a conversation with Techopedia to discuss the growing role of stablecoins in addressing the unique financial challenges faced by Argentinians.

“As Latin America’s second-largest country by population and third-largest economy, Argentina has faced economic challenges, with the nation’s annual inflation rate skyrocketing to an alarming 211.4% in 2023,” explained Nunes.

“Economic volatility like this underscores the urgency for innovative financial solutions that democratize access to money on a global scale. The appetite for solutions that bridge the gap between digital assets and fiat is reflected in crypto usage in regions such as these.”

“Chainalysis found that Argentina is second in Latin America for crypto adoption and 15th in the world.”

The Potential of Blockchain in Transforming Traditional Financial Systems

Discussing the transformative potential of stablecoins for protecting everyday people from economic shocks, Nunes highlighted its maturity and viability as a contender for widespread adoption.

“Blockchain technology has significantly evolved over the past 15 years, reaching a point of maturity that positions it as a feasible contender for widespread consumer and institutional adoption. This period of maturation has enabled blockchain to offer optionality and inclusivity not previously available in traditional financial systems.

“The dramatic surge in stablecoin adoption in Argentina is a clear indicator of the population’s search for stable financial solutions amidst the country’s economic turmoil.”

He stressed the importance of crypto platforms in offering practical solutions for daily transactions and savings, shielding Argentinians from the adverse effects of inflation by providing an accessible onboarding option.

“Two-thirds of Latinos want greater flexibility to use crypto and traditional payment methods interchangeably in their day-to-day operations, reflecting the rising demand for enhanced efficiency in financial services within these regions.

“As such, the opportunity that blockchain technology can bring to individuals in economically volatile regions is unparalleled.”

The Bottom Line: The Future of Finance in Argentina

If governments and TradFi cannot find a solution, people will do whatever they can to find stability.

Stable currency is not yet enshrined as a human right, and if a population finds its ability to live, work, and save decimated for years at a time by devalued currency, they will seek lifeboats elsewhere.

As Argentinians work through these challenging times, the country operates as a testbed where stablecoins are thriving, potentially offering a future where financial stability and inclusivity are within reach for all.

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Sam Cooling
Crypto & Blockchain Writer

Sam Cooling is a crypto, financial, and business journalist based in London. Along with Techopedia, his work has been published in Yahoo Finance, Coin Rivet, and other leading publications in the financial space. His interest in cryptocurrency is driven by a passion for leveraging decentralized blockchain technologies to empower marginalized communities worldwide. This includes enhancing financial transparency, providing banking services to the unbanked, and improving agricultural supply chains. Sam has a Master’s Degree in Development Management from the London School of Economics and has worked as a Junior Research Fellow for the UK Defence Academy.