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A distinct dichotomy has emerged among Bitcoin proponents, one which appears to place the pioneers of what has, for the first time ever, emerged as a potential alternative to sovereign currency.
This dichotomy places virtual currency proponents in two camps, one being the media-savvy maverick pioneers wishing to demonstrate fiscal anarchy and garner some degree of celebrity, and the other being the shrewd, long-term, technologically advanced corporation which sees benefit in backing the development of virtual currency with full support of some of the world’s most respected regulatory authorities.
With these two well-defined sets of characteristics surrounding Bitcoin, regional location has a bearing. Argentina’s year-long thirst for Bitcoin is a particular case in point.
The South American nation has taken such a shine to virtual currency that last year’s values were between 30% and 40% higher than in neighboring Uruguay, and several well-attended Bitcoin meetups took place at upscale venues in Buenos Aires, the most recent having been conducted by Dr Hugo Scolnik, a world renowned professor of mathematics, and Mauricio Taslik, an expert in cryptography and identification technologies.
Argentina’s Bitcoin enthusiasts grew in significant numbers last year, leading to BTC Global presenting at several events, and the μMeetUp scene being established at Bar Duarte, in the affluent Palermo district of the nation’s capital.
Today, a year on from Argentina’s president Cristina Kirschner having imposed her latest ruling to abolish dollars and strengthen the capital control rules on local peso even further, it is becoming increasingly likely that Argentina is poised to be the first nation to adopt Bitcoin on a national level, in order to circumvent the damaging effect on their financial freedom that the outlawing of dollars and introduction of the worthless Cedin pseudo-currency last year may well have.
According to the Bitcoin Market Opportunity Index (BMOI), which measures inflation rates, financial history and technology penetration to decipher where Bitcoin is best positioned to replace sovereign currency altogether, Argentina ranked as the most likely jurisdiction for this to occur, emerging ahead of 177 other nations which were ranked.
When considering that the Kirschner administration has made no less than thirty attempts within the last three years to relieve Argentinians of their US dollars, a currency which was widely used by Argentinian citizens until 2011 when it became illegal to use dollars, causing citizens to have to face being restricted to peso which is not allowed to be exported from Argentina, and subject to 20% inflation. In addition, Argentina’s government insists that citizens ask permission from the government to venture abroad with pesos, and are only allowed a nominal amount with which to travel, which is subject to extremely high costs imposed by the government.
Bitcoin therefore is viewed as the route to the free market by Argentinian businesses, with a number of retail outlets increasingly cancelling their credit card machines and accepting Bitcoins, as the Argentinian government applies extremely high transaction charges and a 15% fee for converting dollars to peso.
In 2013, Argentina’s government estimated that there were approximately $160 million held in overseas accounts by Argentinian citizens. Whilst the government had no jurisdiction over the funds held in legitimate bank accounts abroad, it sought to do its utmost to repatriate it and return it to pesos. As well as banning the use of dollars within its borders, the government asked all holders of US dollars to repatriate them and receive a ‘certificate for deposit’, referred to as Cedin. This would play the part of an IOU from the government, which is backed by the Argentinian national bank. Indeed, most of Argentina’s population have very little faith in the government or the banking system, concerning themselves with the protection of their assets by not succumbing to this initiative.
Another option for Argentinians who hold dollars abroad is to continue to do so, however these dollars would eventually be replaced by peso from just day to day life. If salaries are paid in peso, and goods are purchased and sold in peso, eventually the dollars would be exchanged. If for example, a motorist bought a brand new car in Argentina before 2011, the transaction could have taken place in dollars, however if that car is now traded in for a new one, the dealer would be legally required to pay in peso for the trade in. This is clearly a situation which astute Argentinians wish to avoid, hence they view Bitcoin as their savior.
As far as the aforementioned two types of Bitcoin proponent are concerned, Argentina’s Bitcoin scene may well have been spearheaded by young, intelligent and charismatic mavericks like BTC Global’s Mauro Betschart, who explained to LeapRate in May this year that in his opinion forward thinking companies which are expecting changes to happen, in terms of technological and legal framework, and have a flexible and strong system to be able to adapt to these changes, will be the ones to triumph in the long run. “We now know now how strong bitcoin is and we are seeing a glimpse of what the world can do with this new technology” stated Uruguay-based Mr. Betschart.
Co-founder of the Bitcoin Foundation of Argentina, Franco Daniel Amati echoed the sentiments gleaned by CoinDesk from many Bitcoin advocates in the region last week by explaining that there is no confidence in the peso.
“We know the peso will lose value – and probably rapidly. With bitcoin, even if it just maintains price, it’s a huge advantage for us Argentinians” stated Mr. Amati.
With Argentina being very unlikely to be able to meet its soveriegn debt obligations yet again, confidence is very low.
Part of the infrastructural advancement in Argentina which is paving the way for the potential virtual currency revolution is that venture capital funds with substantial success in investing in innovative start ups which have led to success are keen to support such innovations.
BitPagos, Argentina’s fiat-to-Bitcoin processing service was backed by Barry Silbert, CEO of American online marketplace for buying and selling illiquid assets SecondMarket.
Founder and CEO of BitPagos Sebastian Serrano grew wise to a need for a payment processor in the region due to the country’s US dollar exchange lockdown that has resulted in a 50% difference between the official and non-official exchange rates.
Those who want access to a more stable reserve can do so without frequenting the much-used black market.
Mr. Serrano noted this need and has been growing quickly, targeting primarily hotels where foreign clients face enormous charges for using credit cards.
From the influential words of the initial pioneers in Argentina’s flourishing Bitcoin scene grew an entire nation intent on ensuring that its government does not impoverish or restrict its financial independence.
Whether this can be regarded as a movement towards a highly advanced cashless society whose highly educated population will gain a borderless currency with which to conduct effective international business without the restrictions or associated costs, and on the basis of that build a technological ecosystem around it, or whether it fits firmly into the category of anarchy is very much a moot point.