Argentina is beginning to think about a Digital Peso.
Governor Raul Jalil submitted a formal proposal to President Alberto Fernandez to create a digital peso for Argentina.
Raul Jalil, the governor of the Argentine province of Catamarca, submitted a written proposal earlier this week to Alberto Fernandez, persuading him to create Argentina’s own national digital currency.
Jalil’s proposal for an Argentine “digital peso” seeks to mobilize Argentina’s battered economy while taking advantage of the benefits given by the blockchain technology, like transparent accounting.
“It is necessary to think of a new model of financial services. Technology not only breaks down the borders between businesses but it is already altering the balance between countries,” Jalil told Argentine newspaper El Ancasti last Tuesday.
The governor’s proposal also included the possibility of tokenizing mining royalties at the local level, enabling digital wallets and blockchain networks to manage the payments.
Governor Jalil’s formal letter to President Fernandez is only the first of many bureaucratic steps should Argentina move forward with a digital peso. Fernandez has the power to reject the proposal outright or pass it on to both the country’s central bank and Congress with his approval. Then the debate amongst Argentine lawmakers will begin in earnest.
The professed goal of creating a central bank digital currency (CBDC) for Argentina, to revitalize its ailing economy, is not without merit. For many years, the country has shared with neighboring Venezuela the distinction of being among the world’s worst cryptocurrencies. However, unlike Venezuela’s petro “cryptocurrency,” an Argentine digital peso will not attempt even to appear decentralized.
In contrast, Jalil’s proposal suggested that the regulatory framework of a CBDC will make things even more comfortable if the central bank-backed monetary issuance. A central bank-backed asset will be more reliable and will make Argentina more attractive to investors than to issue a decentralized currency, stated Jalil.
“It could result in a lower implicit risk of the capital since most cryptocurrencies have a price with a high speculative component. That is to say that it would offer a more attractive investment for less specialized or relatively risk-averse investor profiles,” said the governor.
Argentina’s relationship with digital currency is not new. The financial crisis paired with currency controls that make it difficult to access foreign money, like the US dollars, has led to increased interest in Bitcoin among the Argentines. The term “dolar bitcoin” has entered the local lexicon as an exchange reference and then become nearly as common as other dollar “denominations” in the country, like the dolar blue, dolar tourist, and dolar retailer.
Argentina also has a very active peer-to-peer Bitcoin trading market. At some point in 2019, after a financial panic amid political turmoil, Bitcoin was trading at a significant premium compared to some other markets.
And meanwhile, some lawmakers have attempted to restrict Bitcoin trading to prevent the flight of pesos, and interest in the cryptocurrency has never been higher.
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