Other countries promote the value of saving, while in Argentina, it has become a nightmare.
Because of the high inflation of their local currency, Argentines have recently tended to hoard US dollars, which has led the central bank to hit back. This move could have starved the government of dollar reserves in a year. This is why yesterday, the central bank hardened measures to avoid the practice by imposing a new 35% tax on purchase made of dollars.
Conversely, Argentines have already counteracted thru buying up DAI, a decentralized stablecoin that runs on the Ethereum blockchain; this has been increasingly popular in Argentina.
The demand for US dollars has grown by 900% this year, with the central bank dominating the supply. Data showed that the number of people who bought dollars has increased from 435,000 in April to 5 million Argentines last month. Then the demand for its crypto counterpart in DAI has likewise spiked.
An economist partner at Argentine firm FM&A, Fernando Marull, said earlier this week that the penalties of not doing something to control the demand for dollars could be disastrous for the country.
Argentina’s central bank would endure distributing $1.1 billion in USD per month. Marull explained that this is unsustainable for Argentina, given that it is net reserves were $8 billion in USD in August. This will be dropped to $3 billion in December, and then zero by April next year.
Everything will be taxed!
To oppose the imbalance, the government has founded a 35% tax on all purchases made in dollars and limited the number of dollars the citizens could legally get a hold of it.
After the news broke, the dollar’s price on the black market has arisen, going from 130 to 150 pesos before going steady at 145 pesos. This is an all-time high, beating out the previous historical peak of 140 pesos reached by July’s finale.
Acquire dollars or “DAI” trying
With the dollar, a stablecoin was designed to hold its value and boomed in price and volume: MarkerDAO’s DAI.
After the news about the taxation scheme spread, the DAI-ARS pair’s trading volume soared and has come close to record levels. The same goes for the price; even if it is pegged to the dollar, Argentines are disbursing more than that to get their digital hands on them.
In Ripio, a Latin American-based crypto trading platform, the stablecoin peaked at 142.50 pesos, with over 12,000 DAI moved in just an hour. That is almost 3X the average. The activity was then released to normal levels, but the prices did not recover.
Thanks to a not-so-healthy mix of a failed economy and a great PR campaign, DAI is going quite popular in Argentina: “It was slow to start, but once we launched a system local Telegram communities, where users can reward one another with Karma points to improve trust, it really took off,” said Mariano Di Pietrantonio, the Maker Foundation’s community lead for Latin America, in a business blog post.
“DAI is a good option because its price is relatively objective and not subject to government control,” said Ariana, a Venezuelan designer based in Argentina who received remittances and payments in DAI. “This allows people to save and even make some purchases by converting their cryptocurrencies through services such as Bitpay or Bitrefill.”
The enthusiasm for DAI is far limited, Ariana noted: “There is still a long way to go because cryptocurrencies are little known.”
But when Bitcoin is being traded at best in Argentina, it is priced at 1,603,381.5 Argentine pesos, on average, according to Ripio. Considering the price of the “blue dollar” it is 142 pesos, it computes roughly $11,200 per BTC. On other exchanges throughout the world, Bitcoin is presently trading below $11,000.