Amidst a turbulent 365-day period during which the Argentine fiat currency – the Peso (ARS) – has lost over half of its value against the U.S. dollar, the country has announced the enforcement of new capital control measures, limiting citizens’ and businesses’ freedom to buy foreign currency.
The decision has been made most likely to encourage more people to use digital currency, particularly the Bitcoin to bypass the restrictions as they have done in other nations.
On Sunday, the central bank imposed restrictions on businesses following a decline of over 25% in the value of the peso since local elections last month. The government’s decision comes after the BCRA lost $3 billion in reserves late last week. An official announcement read:
“Given diverse factors that affected the evolution of the Argentine economy and the uncertainty caused in the financial markets, the [government] considered it necessary to adopt a series of extraordinary measures aimed at assuring the normal working of the economy, sustain the level of [economic] activity and employment, and to protect consumers.”
The president of Argentina Mauricio Macri recently signed a bill that introduced limitations on foreign currency purchases. According to the new measures, large exporters will be required to obtain permission from the central bank of Argentina to buy foreign currency and transfer it abroad.
In addition to that, companies as well as banks must seek authorization to sell ARS for foreign currency, and individuals will not be allowed to buy over $10,000 per month. This measure will be in effect until December 31st, 2019.
In August, Argentine peso and government bonds collapsed amidst the crushing defeat of incumbent President Mauricio Macri in the primary. At some point, on local exchanges Bitcoin was trading $300 higher than the average market price.
Meanwhile, a further decline in the peso threatens hyperinflation, which will certainly force many citizens to look for alternative ways to save money. Cryptocurrency may serve the need in this situation.
The new capital control measures represent an improvement from older laws which required a purchase limit for individuals of $2,000. It also removes a hurdle that required individuals to present to the country’s revenue service (AFIP), evidence to justify their income before they can buy dollars.
Whilst Argentineans are now legally barred from purchasing above $10,000 monthly, Bitcoin does not place a cap on the number of units that anyone can hold. Additionally, there is no limit to the amount that can be transacted within a particular time frame.
Argentinians could look towards China for solutions on subverting state capital controls. The Chinese are still big on Bitcoin despite every effort from the government to quash it. Peer to peer trading has increased there and it appears to be on the rise in Argentina also.
According to data on localbitcoins volume for the Argentine peso has surged this year. It peaked in July topping $15 million for the week and has been high in August at over $12 million.
Either way, the latest capital control measures have highlighted Bitcoin’s strength and raised hope that soon, more than a few Argentines will consider the cryptocurrency as a ‘safe-haven asset’ amidst the growing economic uncertainties.