Sensing Threat, IMF and Argentina Agree to “Discourage” Crypto Use

  • Argentina approved a $45bn restructuring plan with the IMF.
  • As part of the deal, Argentina must “discourage” the use of cryptocurrencies.
  • Cryptocurrencies are extremely popular in Argentina because of chronic economic mismanagement.

Only days before defaulting on a loan repayment to the IMF, Argentina’s legislature approved a $45bn restructuring plan. If approved by the IMF’s board, this will be the 22nd deal the country strikes with the IMF. Argentina was cut out from international financial markets after it defaulted on its foreign debt in May 2020 for the ninth time in its history and the second time in the 21st century. The deal with the IMF involves reducing the country’s fiscal deficit and ending the loose monetary policies which have made inflation reach 52.3% this year.

As part of a letter of intent signed by both parties on 3 March, Argentina pledged to “discourage the use of crypto-currencies” in order to safeguard financial stability. This follows an unironic warning by the Argentinian central bank regarding the volatility and risks involved in using cryptocurrencies. Cryptocurrencies, of course, have no role to play in Argentina’s financial troubles. They have, instead, provided a “lifeline” to Argentinians where their institutions have failed. As Bloomberg reported, Argentina is the country with the highest proportion of people getting paid in cryptocurrencies. This is because workers are desperate to mitigate the effects of a crumbling currency and extreme inflation. Argentina also ranked 21st in the world for realised Bitcoin gains, 10th in the world with regards to crypto adoption and has witnessed a boom in the use of crypto-linked credit cards.

As a result of severe economic conditions, Argentinians flocked towards Bitcoin and other cryptocurrencies. The IMF and the government of Argentina joined forces to fight back against a natural process that would have witnessed the demise of the Argentine peso. As we have argued elsewhere, banning or “discouraging” Bitcoin use is admitting defeat in the face of its growing importance.

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