Can Presidential Candidate’s Pro-Bitcoin Stance Make Argentina the Next El Salvador?

By Jaleel, Kaori, BlockBeats

“Due to the current situation, we are temporarily unable to display prices on our shelves. Please inquire for prices at the cash register. All cash promotions are suspended until further notice. Thank you for your understanding.” This is a notice posted outside a small market in Argentina, fully Reflecting the chaos of the Argentine economy in recent years.

Nathan, a journalist, came to the Argentine capital again after a lapse of 10 years in early April this year, and he also experienced this first-hand. Like everyone else, the first thing Nathan does when he lands is exchange currency, but in this place exchange rates vary wildly depending on how and where you get your pesos.

The official exchange rate is one dollar to 220 pesos; I went to several Western Union offices to exchange money, but was told that there was no cash; after being “pointed” by a local friend, Nathan found “cuevas” or black markets on a certain street , the exchange rate here is close to 400 pesos.

But Nathan is facing the second big problem, because the current largest denomination bill is 1,000 pesos, which is worth less than 2.04 U.S. dollars. After the exchange, there are piles of banknotes and bills in his wallet and pockets, and he carries a backpack full of them. The pesos are extremely ostentatious when going out and spending daily, which makes people frightened.

It is hard to imagine that this is Argentina, whose economic aggregate ranked among the top ten in the world at the beginning of the 20th century. In recent years, due to factors such as the international economy, finance, and the epidemic situation, Argentina’s economic growth rate has not only slowed down significantly, but its inflation rate has also reached 100%. The value of the peso has been depreciated repeatedly. The weakest currency. Bank of America pessimistically predicts that the peso’s official exchange rate will fall to 545 by the end of this year and 1,193 by the end of next year.

Therefore, under the complex situation of the country’s economy, many people place high hopes on Argentina’s new general election.

Presidential Candidate Who Threatens To Blow Up His Country’s Central Bank

The new general election will be held on October 22. According to the results of the primary election on August 13, the number one presidential candidate is Javier Milei from the minority party libertarianism, with 31.57% of the votes. far exceeded expectations.

As the candidate with the highest rate of votes currently, Javier Milei’s proposals have been greatly discussed. One of the most discussed is how to solve the core problem of the Argentine economy, inflation. On this issue, Javier Milei’s solution is very unexpected-closing the central bank. Javier Milei also published the book “The End of Inflation”, which details the measures he will take if he is elected president.

According to Javier Milei, the creation of the Central Bank in 1935 was the beginning of all problems in Argentina. Without a central bank, Argentina was the richest country in the world, and inflation averaged just 0.9 percent a year from 1880 to 1935. The establishment of the central bank in 1935 fooled all the people: inflation jumped to an average of 6% per year. The Central Bank was nationalized in 1946 and by 1991 the average inflation rate was 250% per annum. It was a total disaster.

Javier Milei, an economist and economic analyst, supports Austrian economic thought and is a staunch supporter of laissez-faire capitalism. He calls himself a “short-term anarchist” and a “long-term anarcho-capitalist.”

In the field of blockchain, the Austrian school is not an unfamiliar concept. The founder of the Austrian school believed that “money is not an invention of the state”. Hayek’s “Denationalization of Currency” is a must-read book for Austrians in the current circle, and it also clearly expresses that the government and the monetary system must be completely separated. The book’s views were considered shocking in 1974, but the emergence of Bitcoin in 2009 made it seem less crazy, and even became a great prophecy. Many even believe that it was this book that helped inspire Satoshi Nakamoto, who himself was most likely an Austrian-based liberal.

These young Argentines desperately need crypto

Under Javier Milei’s vision, Bitcoin will take over as a remedy for inflation in Argentina after the country’s central bank is shut down. Before the presidential campaign, Javier Milei was on several talk shows, often extolling the benefits of Bitcoin and cryptocurrencies. “Bitcoin can eliminate the central bank,” said Javier Milei.

Javier Milei’s unconventional stance resonated with many, especially young internet- and tech-savvy voters.

According to Zocaro, a spokesperson for Bitcoin Argentina, the use of cryptocurrencies in Argentina has been on the rise since around 2020, with many people starting to buy Bitcoin and stablecoins. Sending money to family and friends abroad, or buying goods from abroad, with all the international restrictions, more and more people are starting to use cryptocurrencies because it’s the money you take out of the house to buy bacon in the morning that may only buy you at night For Argentines who can afford bread, cryptocurrencies are a way to preserve value.

Unlike the mysterious “cuevas”, Zocaro said, "Cryptocurrency is completely legal in Argentina, and people are starting to notice the inflation of the dollar and see Bitcoin as a possible alternative. Most young Argentines prefer Bitcoin, Ether and stablecoins. Some provinces like Mendoza have taken steps to allow people to pay their taxes in cryptocurrencies.”

According to a survey conducted by Americas Market Intelligence in April 2022, nearly 51% of Argentinian consumers bought it. That’s up from just about 12% in a similar survey conducted in late 2021. The survey also found that a whopping 27 percent of Argentinian consumers buy cryptocurrencies on a regular basis, with the main reasons for buying including investing, protecting against inflation and avoiding government control.

While many older Argentines still prefer to hold USD cash, more and more young people and residents are starting to prefer USD stablecoins. “They don’t need to deal with cash, they can complete the transaction through their mobile phone,” said the platform that offers cryptocurrency transactions to Argentinian users, two-thirds of whom are under 35 years old.

Is a pro-Bitcoin stance a political ploy?

Javier Milei’s bold vision and radical reforms enjoy the support of most groups, but at the same time face firm resistance from many large institutions, authorities and social forces.

Some argue that cryptocurrencies are still not widely adopted around the world and that many people do not have the technological literacy needed to actually use it, especially vulnerable groups such as young children, the elderly and people with disabilities. Most of the current use of cryptocurrencies comes from the middle and upper elite and educated young people because of their ability to obtain information and foreign currency.

Others expressed a fear of cryptocurrencies, and that fear was well founded. While Argentines are used to volatility, the ups and downs of cryptocurrencies have spooked many looking for stable savings. Without financial literacy and economic literacy, then cryptocurrency does not seem like a good insurance, after all, here is a sea full of Ponzi schemes.

Most importantly, some professionals said that it is impossible for Argentina to pass the Bitcoin payment plan, because the Argentine Senate has approved a $45 billion debt agreement with the International Monetary Fund (IMF), and one of the terms of the agreement is precisely that. Encourage the use of cryptocurrencies.

Immediately afterwards, critics began to question Javier Milei’s position, questioning whether it was actually good for the country, or just a political ploy to win votes from younger voters with a deep understanding of technology. These young people are dismayed by the stagnation of the Argentine economy and even disgusted by the traditional approach to financial policy.

After all, some shrewd politicians have discovered that young votes in the encrypted world are a “must fight” for national votes, especially in South Korea, where involution is serious and young people are eager to get rich quickly and turn around. According to statistics from the Financial Services Commission (FSC) of South Korea, there are 3.08 million young people aged 20-39 who speculate in cryptocurrencies in South Korea, reaching 23% of the population in this age group (13.431 million), accounting for nearly one-fifth.

During the South Korean presidential election in March last year, the current South Korean President Yin Xiyue promised to relax the regulation of the cryptocurrency industry. By. At that time, Yin Xiyue’s biggest competitor, the Democratic Party candidate Li Zaiming, was regarded as the successor of the former President Moon Jae-in. He not only announced earlier that he would accept cryptocurrencies as political donations for the campaign, but also said that he would cast NFT for campaign donors. As a proof of donation and souvenir, the NFT issued will also include Li Zaiming’s photos and political opinions.

Politicians may just see pro-cryptocurrency moves as the golden tinfoil of their career path, but in some parts of the world, the existence of cryptocurrencies is nothing short of the bread and future of local people.

Related reading: “In these countries, Web3.0 is their bread of tomorrow”

How is the bitcoin experiment in El Salvador doing now?

The beauty of encryption is that their technology is decentralized and autonomous. Javier Milei’s preference for cryptocurrencies is further enhanced by the specific characteristics of the current Argentine economy: chronic inflation and distrust of the government, which reduces the value of the currency and drives people to other sources of value that are not controlled by the state.

This makes people think of El Salvador, the first country in the world to adopt Bitcoin as legal tender. On September 7, 2021, the bill came into effect and Bitcoin officially became the legal tender of the country. El Salvador’s continued Bitcoin “adventure experiment” has attracted the attention of countries all over the world.

The first year of Bitcoin’s “risky experiment” does not seem to be going well. Ratings agencies Moody’s and Fitch both downgraded El Salvador and removed it from Rating Watch (UCO) following the passage of the Bitcoin 2021 bill, while the country’s dollar-denominated bonds also came under pressure.

According to a report from The Block in September 2022, according to the Bitcoin purchase disclosed by El Salvador’s President Nayib Bukele, calculating the average purchase price and the value of Bitcoin earlier on September 7th, their Bitcoin portfolio has lost About 58% of book value. Then, a new poll 1 month later showed that 77% of people believed that the juxtaposition of Bitcoin as a legal tender with the U.S. dollar “was a failure” and that the president “should not continue to use public funds to buy Bitcoin.”

However, President Nayib Bukele was not affected by these. In November 2022, he stated on social media platforms that starting tomorrow, he will buy one bitcoin per day. At Nayib Bukele’s insistence, two years later, the status quo of El Salvador’s Bitcoin “risky experiment” has changed a lot as the price of Bitcoin has risen from the bottom.

On January 24 this year, the government of El Salvador repaid the maturing US$800 million bond, including all principal and interest. Some investors in El Salvador’s international bonds say they’ve earned 60 percent this year alone, and even with those high returns, others think they can hold on. A report on emerging markets in Latin America released by JPMorgan Chase & Co. in early August stated that the data in El Salvador in recent months is generally optimistic, and the fiscal deficit continues to show a downward trend.

Apparently, El Salvador’s bonds have also caught Wall Street’s attention. JPMorgan, Eaton Vance and PGIM Fixed Income, among others, have recommended or bought El Salvador’s national debt, betting it will continue to climb. Lord Abbett & Co LLC, Neuberger Berman Group LLC and UBS Group AG have also bought El Salvador bonds since April, according to Bloomberg data.

Nayib Bukele has recently posted “I told you so” (I told you so) copywriting on social media many times, quite proudly showing his governance achievements. Nayib Bukele also claimed that tourism in El Salvador has increased by 95% since Bitcoin became a legal tender. Today, according to a new poll report by TResearch, about 94% of Salvadorans intend to vote for the current president, Nayib Bukele, to continue as president.

Looking back, many of the skepticism people had about El Salvador’s bitcoin experiment still lingers today. But El Salvador’s gradual stabilization of the economic order has contributed a lot to its transformation from a country rated by the media as the most dangerous country in the world to a corner of Latin America with zero official homicides.

Argentina’s pro-Bitcoin presidential candidate Javier Milei’s leading vote rate also proves that the future Argentina may also follow the path of El Salvador.

Although the volatility of Bitcoin makes investors often frightened, compared with the economic shocks in some third world countries, cryptocurrency is one of their few swords to break the situation. Perhaps, what the young people of this generation want is to have a stable income, so that the salary they just received will not depreciate by 50%. Politicians use cryptocurrency as a canvassing tool, but ordinary people with one vote just want to make their own choices for the foreseeable future.