When a government decides to restrict what people can do with their own money, there is usually some backlash. Argentina is doing exactly that to prevent capital flight as the local currency crashes. The move is likely to encourage more people to use Bitcoin to circumvent the restrictions as they have done in other nations.
Central Bank Clamps Down
On Sunday the central bank levied restrictions on businesses following a decline of over 25% in the value of the peso since local elections last month. According to the FT the Argentine central bank (BCRA) will require exporters to repatriate revenue from sales abroad. Additionally all companies and banks must seek authorization to sell pesos for foreign currency. Individuals would be limited to purchases of just $10,000 per month. The move has come after the BCRA lost $3 billion in reserves late last week.
On Wednesday last week rating agency Standard & Poor’s classified a default on Argentina’s announcement to defer over $100 billion in debt. When President Mauricio Macri took power in late 2015 he abolished capital controls which had been holding the country back since 2011.
This latest move is a step backwards for the economy which has been floundering since mid-August when the S&P Merval Index plunged almost 50% in dollar terms. This marked the second largest one day rout on any of the 94 stock exchanges Bloomberg has tracked since the 1950s.
The stock market has continued to plunge with concern over the prospects of a return to populism in Argentina. The government’s reaction at the weekend has been an attempt to prevent further economic volatility, an official announcement read;
“Given diverse factors that affected the evolution of the Argentine economy and the uncertainty caused in the financial markets, the [government] considered it necessary to adopt a series of extraordinary measures aimed at assuring the normal working of the economy, sustain the level of [economic] activity and employment, and to protect consumers,”
Bitcoin advocate Alex Krüger was not amused;
Governments have a knack for telling people what they can and can’t do with their money.#WhyBitcoin
Taxes are understandable, quotas unacceptable.
— Alex Krüger (@krugermacro) September 1, 2019
Bitcoin Adoption The Answer
Argentinians could look towards China for solutions on subverting state capital controls. The Chinese are still big on Bitcoin despite every effort from the government to quash it. Peer to peer trading has increased there and it appears to be on the rise in Argentina also.
According to coin dance volume on local bitcoins for the Argentine peso has surged this year. It peaked in July topping $15 million for the week and has been high in August at over $12 million. With this latest restriction on financial flows, investors and businesses will be looking at alternative methods of moving money and Bitcoin could be the answer to their problems.
Image from Shutterstock
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