Published: November 22nd, 2023
Libertarian contender and Bitcoin advocate Javier Milei is set to become the next President of Argentina after his election victory in a second-round runoff on Sunday, 19th November.
Data from Reuters shows that Milei took 56.3 per cent of the vote versus 44.2 per cent for centre-left rival Sergio Massa, currently Argentina's economy minister. He ran on behalf of the country's current Peronist coalition government.
Calling his mandate the ‘rebuilding Argentina,’ Milei told supporters that the challenges of a spiralling inflation rate and a rapidly declining peso meant that 'there is no longer time for gradual measures’. He vows to implement a programme of economic shock therapy that includes eliminating Argentina’s central bank, effectively abandoning the peso and letting the economy move to dollarisation.
Milei is an enthusiastic Bitcoin supporter, calling the cryptocurrency a return to the original creator of money, the private sector. He opposes the existence of central banks on principle and has described Argentina's central bank as ‘one of the great confidence schemes in our nation’s history.’ He claims that central bankers rob normal citizens of spending power through inflation, which operates as a stealth tax. Bitcoin, he says, is a natural reaction against central bank scheming.
Known for his shock of unkempt hair and hardline libertarian policy prescriptions, 53-year-old Milei first gained notoriety as an economist and harsh government critic before being elected to Argentina’s congress in 2021.
During the Presidential campaign, Milei struck an extreme populist pose, often waving a chainsaw at political events to demonstrate his commitment to cutting government spending. Among his more radical proposals are to allow a free market in both firearms and human organs. He also wants to repeal the country's 2020 abortion legalisation bill.
Milei will officially take office on December 10.
Argentina already counts itself amongst the short list of Bitcoin early adopter nations. In August 2022 the country’s West-central Mendoza province began accepting stablecoins as payment for tax bills.
The province, which borders Chile on the west, expanded the payment options for its 1.7 million citizens in an effort to make tax payments easier and more convenient, according to a press release on the government website.
In a lengthy document explaining the process for crypto payment, the state tax authority listed MakerDAO’s DAI and Tether’s USDT stablecoins as available options.
Taxpayers can use crypto wallets from Ripio, Lemon, Buenbit, Binance, Bitso, or Bybit amongst others. After providing ID and other preliminary information, a tool on the tax authority’s website generates a QR code users can scan with their crypto wallets.
After receiving the stablecoins, the provincial government converts the US-dollar-pegged cryptos to Argentine pesos (ARS) and generates a receipt for the transaction.
Mendoza province is situated in western-central Argentina. The capital city is also called Mendoza. It’s Argentina’s fourth largest province by population, with over 1.7 million inhabitants.
Argentina, which has frequently seen its economy and politics roiled by political upheaval, extreme inflation, and major bankruptcies, had been cozying-up to crypto in the early part of the year. It posted a 63 per cent year-over-year inflation rate in August 2022, perhaps explaining some of the Mendoza government’s enthusiasm for giving taxpayers more flexibility and choice. Cryptocurrencies had been touted by some in the country as a hedge against inflation.
With stablecoins tied to the mighty greenback, America’s relatively lower 8.5 per cent inflation rate offers a way for some Argentines to protect their household spending power.
A surge in Argentinian forex traders using crypto to swap ARS for USD had previously prompted the federal government in Buenos Aires to impose restrictions on the activity. In July 2022, the country’s central bank barred anyone buying cryptocurrency from accessing the country’s foreign exchange market, arguably in an effort to stem the tide of peso to dollar conversions.
Back in August 2021, Argentine president Alberto Fernandez said that he was open to the idea of crypto playing a larger role in the South American country's economy.
In an interview with Reuters, Fernandez said he would consider the creation of a central bank digital currency, or possibly follow northern Neighbour El Salvador’s lead and make Bitcoin one of the country's forms of legal lender.
‘I don't want to take unnecessary risks with our economy or currency, but on the face of it there is no obvious reason to say ‘no’ to a careful approach to cryptocurrency adoption.’ Experts believe cryptocurrencies are largely immune to inflationary effects, which is something we are struggling with.’
Inflation can be an explosive issue in Argentine politics. When Fernandez won the presidency in 2019, the Reuters’ World Misery Index rated Argentina the ‘second-most miserable economy in the world.’ The country also has draconian currency exchange controls, sparking a booming black market in foreign currencies. That’s very different from the situation in El Salvadoran, where the US dollar is also a form of legal tender.
Fernandez says his interest in cryptocurrencies like Bitcoin is balanced. He views them as potential tools to hedge against inflation. This week's announcement that the country’s biggest private bank has launched crypto services may be a signal that the state is adopting a more welcoming attitude to digital assets.
Interest in cryptocurrencies has grown considerably in Argentina as it it can be used to gain indirect exposure to the US dollar, a mechanism that Argentine investors have used to offset devaluation of the Argentine peso. Along with Bitcoin and Ethereum, stablecoins like DAI have found a large user base among Argentine crypto traders.
In May 2022, Buenos Aires-based Banco Galicia, Argentina's largest private bank, gave its clients access to trading services in four different cryptocurrencies, Bitcoin, Ethereum, XRP and USD Coin.
Customers immediately took to Twitter to post screenshots of the new crypto services after Banco Galicia confirmed the launch of the new services in a company blog.