The government of Argentina has imposed capital controls on its citizens in a response to growing financial issues for the country. The South American country has limited dollar purchases to only $10k per month after $3 billion was drained out of their foreign currency reserves on Thursday and Friday alone. Is it time to switch to Bitcoin?
Argentina On Brink of Default
Argentina’s national currency, the peso, has been in free fall the past few weeks as the government attempts to pay off their short term debts. The peso is down over 25% in the last month alone. Interest rates spiked heavily as the Argentinian central bank tried to control their debt, making the decision Wednesday to delay payments on the $7 billion of debt this year.
The decision comes from President Mauricio, who ran on the promise to get rid of state intervention in the economy. He is now doubling back on his ideals by imposing currency controls. The current political landscape in Argentina is suggesting Mauricio and his party will lose power in the upcoming October election. This fact is scaring many investors in the country.
The opposition has been calling for currency controls, claiming that the government was in a “virtual default.” The reserves of the central bank fell nearly $12 billion due to political uncertainty
Bitcoin as a safe-haven
One of Bitcoin’s most attractive aspects is the fact that it isn’t controlled by any one party. Traditional fiat currencies are controlled by the state, allowing them full control over the country’s monetary policy. They can adjust inflation rates, change interest rates, and, in this case specifically, implement currency controls to tell their citizens what they can or can’t do with their money.
If the peso continues to drop, we may see another fiat currency undergo hyperinflation. The citizens will continue to lose confidence in their state currency and look for other alternatives. And if these restrictions stay in place or get worse, the dollar will not be an option.
Bitcoin and other cryptocurrencies might be the safe haven the Argentinian people need as they’re faced with this economic uncertainty. A plummeting currency won’t be accepted by very many people as there’s no guarantee that it’ll be worth anything the next day. Bitcoin could fill the void as people face more and more difficulties trying to secure their wealth.
What do you think about Argentina’s new policy? Could Bitcoin help its citizens? Let us know in the comments below!
Images courtesy of Shutterstock, Bitcoinist Media Library
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