When it comes to blockchain and digital currencies, the whole world is split down the middle: some governments are driving crypto-friendly policy while others are fending off cryptocurrencies by means of strict regulation. On Sunday, the Central Bank of the Republic of Argentina introduced new rules of capital control which allow us to suggest that the government believes in Bitcoin and prefers cryptos to fiat money.
Argentina’s central bank has rapidly cut down the amount of US dollars citizens can purchase. Previously, savers could purchase no more than $10,000 per month. Now, this amount is reduced to $200 only. This limitation decreases the US dollar purchasing power by 98%.
The bank’s statement reads:
“[The new measure] establishes a new limit of $200 per month for dollar purchases for individuals with a bank account and $100 for the amount of dollars that can be purchased in cash. These limits are not cumulative.”
The institution has explained this decision by the necessity to preserve the reserves of the Central Bank. Argentina’s fiat currency, the Argentine peso (ARS), has seen a dramatical drop this year, its annual inflation has exceeded 50%. Besides, after the country’s former president Mauricio Macri was voted out of power, Argentina’s peso currency, bonds, and equities were under sell-off. Being afraid of outflows of foreign exchange reserves, the government decided to strengthen its capital control.
“Given the current degree of uncertainty, the Board of Directors of the BCRA decided to take a series of measures this Sunday that seek to preserve the reserves of the Central Bank. The measures announced are temporary, until December 2019,” in such a way the bank explains its decision.
In this difficult financial situation, the authorities of Argentina are planning to extend maturities with private creditors and the International Monetary Fund.
Citizens of Argentina could not predict such a course of events. For them, it is a big question of how to preserve their reserves. A possible effective solution is Bitcoin.
The top currency can be used as a store of value (SoV). Due to this ability, Bitcoin has enjoyed an increased demand in Argentina. As the data from Bitcoin trading on P2P platform Localbitcoins show, Bitcoin is experiencing the third-strongest week in Argentina. While Argentina’s peso is down over 50%, the price of Bitcoin with its highly volatile nature is up 154.82%.
In Argentina, as well as in other economically unstable countries, Bitcoin can be a suitable solution that allows citizens to store their wealth in a decentralized system.