Author: Jaleel, Kaori, BlockBeats

"Due to the current situation, we are temporarily unable to display prices on the shelves. Please inquire about prices at the checkout counter. All cash promotions are suspended until further notice. Thank you for your understanding." This is a notice posted outside a small market in Argentina, which fully reflects the chaos in the Argentine economy in recent years.

Nathan is a journalist who, in early April of this year, returned to the capital of Argentina after a 10-year absence and experienced this firsthand. Like everyone else, Nathan's first task upon arrival was to exchange currency, but the exchange rate in this location varies greatly depending on the method and location of obtaining pesos.

The official exchange rate is 1 USD to 220 pesos. Nathan went to several Western Union offices to exchange currency, but was told that there was no cash available. With the help of a local friend, he found a "cuevas" or black market on a certain street, where the exchange rate was close to 400 pesos.

But Nathan faced a second major problem, because the largest denomination of banknotes currently available is 1000 pesos, worth less than $2.04. The exchanged paper currency piles up in his wallet and pockets, and carrying a backpack full of pesos for daily expenses and outings is very conspicuous and makes people nervous.

It is hard to imagine that Argentina, which was once among the top ten economies in the world in terms of total output in the early 20th century. In recent years, due to factors such as the international economic and financial situation and the pandemic, Argentina's economic growth has not only slowed significantly, but the inflation rate has also reached 100%, and the value of the peso has depreciated sharply. It can be said that it is the weakest currency in the world this year. Bank of America predicts pessimistically that the official exchange rate of the peso will fall to 545 by the end of this year and to 1193 by the end of next year.

Therefore, in the complex situation of the domestic economy, the new election in Argentina has been highly anticipated by many people.

Presidential candidate threatens to blow up the country's central bank

The new election will be held on October 22nd. The primary election ballot counting results on August 13th showed that the presidential candidate who ranked first is Javier Milei from the minor party Libertarianism, with a vote rate of 31.57%, far exceeding external expectations.

As the candidate with the highest current approval rating, Javier Milei's proposals have been widely discussed. The most discussed of these is how to solve Argentina's core economic problem, inflation. On this issue, Javier Milei's solution is very unexpected - to close the central bank. Javier Milei has also published a book on this topic, "The End of Inflation," which provides a detailed introduction to the measures he will take after being elected president.

According to Javier Milei, the establishment of the central bank in 1935 was the beginning of all problems in Argentina. Without a central bank, Argentina was the wealthiest country in the world, with an average annual inflation rate of only 0.9% from 1880 to 1935. The establishment of the central bank in 1935 fooled everyone: the average inflation rate jumped to 6% per year. In 1946, the central bank was nationalized, and the average inflation rate was 250% per year until 1991. This was a complete disaster.

Javier Milei, an economist and economic analyst, supports the economic thought of the Austrian School and is a staunch advocate of laissez-faire capitalism. He calls himself a "short-term anarchist" and a "long-term anarchist capitalist".

In the field of blockchain, the Austrian School is not a strange concept. The founder of the Austrian School believed that "money is not an invention of the state". Currently, Hayek's "Denationalization of Money" is a must-read book for the Austrian School in the industry, which clearly expresses the need for a complete separation of government and monetary systems. The views expressed in the book were considered shocking in 1974, but the emergence of Bitcoin in 2009 made it seem less crazy and even a great prophecy. Many people even believe that it was this book that helped inspire Satoshi Nakamoto, who himself is highly likely to be a libertarian based on the Austrian School.

These young Argentinians are in great need of cryptocurrency

Under Javier Milei's vision, after the closure of the country's central bank, Bitcoin will become the main force as a remedy for Argentina's inflation. Before the presidential election, Javier Milei appeared on multiple talk shows, often promoting the benefits of Bitcoin and cryptocurrency. "Bitcoin can eliminate central banks," said Javier Milei.

Javier Milei's unconventional stance resonates with many people, especially young voters who are knowledgeable about the internet and technology.

Bitcoin Argentina spokesperson Zocaro believes that Argentina has been experiencing a growth trend in the use of cryptocurrencies since around 2020, with many people starting to buy Bitcoin and stablecoins. More and more people are using cryptocurrencies to send funds to family and friends abroad or to purchase goods from overseas, as international restrictions continue to tighten. For Argentinians who may only be able to afford bread in the evening after spending their money on bacon in the morning, cryptocurrencies provide a way to protect their value.

Unlike the mysterious "cuevas," Zocaro said, "Cryptocurrencies are completely legal in Argentina, and people are beginning to take notice of the inflation of the US dollar and see Bitcoin as a possible alternative. Most young Argentines prefer Bitcoin, Ethereum, and stablecoins. Some provinces in Mendoza have already taken measures to allow people to pay taxes with cryptocurrencies."

According to a survey conducted by Americas Market Intelligence in April 2022, nearly 51% of Argentine consumers have purchased it. This proportion is higher than the data from a similar survey conducted at the end of 2021, which was only about 12%. The survey also found that as many as 27% of Argentine consumers regularly purchase cryptocurrencies, with the main reasons for purchasing being investment, inflation protection, and avoiding government control.

Although many older Argentines still prefer to hold US dollars in cash, more and more young people and residents are starting to prefer USD stablecoins. "They don't need to deal with cash and can complete transactions through their phones," said a platform that provides cryptocurrency trading for Argentine users. Two-thirds of Argentine users are under the age of 35.

Is the pro-bitcoin stance a political tool?

Javier Milei's bold vision and radical reforms have received support from most groups, but at the same time, they have faced strong resistance from many large institutions, authoritative figures, and social forces.

Some people believe that cryptocurrencies have not yet been widely adopted around the world, and many people do not have the technical literacy necessary to truly use them, especially vulnerable groups such as children, the elderly, and people with disabilities. Currently, the majority of cryptocurrency users come from the middle and upper class and educated young people, as they have the ability to access information and foreign currencies.

Some people express fear towards cryptocurrency, and this fear is not unfounded. Although Argentinians are accustomed to volatility, the fluctuations of cryptocurrency still scare many people who seek stable savings. Without financial knowledge and economic literacy, cryptocurrency may not seem like a good safeguard, especially since it is a sea full of Ponzi schemes.

The most important thing is that professionals have stated that Argentina is unlikely to adopt a Bitcoin payment scheme, as the Argentine Senate has approved a $45 billion debt agreement with the International Monetary Fund (IMF), one of the terms of which is to discourage the use of cryptocurrencies.

Following that, critics began to question Javier Milei's position, questioning whether it is truly beneficial to the country or simply a political strategy to gain votes from young voters who have a deep understanding of technology. These young people are disappointed with the stagnation of the Argentine economy and even strongly oppose traditional financial policies.

After all, some savvy politicians have realized that the young voters in the world of encryption are the "must-win" battlegrounds in national elections, especially in South Korea, where internal competition is severe and young people are fanatically trading coins in the hope of getting rich quickly. According to the Financial Services Commission (FSC) of South Korea, there are 3.08 million young people aged 20-39 who trade cryptocurrencies, accounting for 23% of the population in this age group (13.431 million), which is close to one-fifth of the total.

Last March during the South Korean presidential election, the current South Korean President, Moon Jae-in, promised to relax regulations on the cryptocurrency industry, while also promising to "take legal measures" against those who illegally profit from cryptocurrency by confiscating their assets and returning them to victims. At the time, Moon's biggest competitor, Democratic Party candidate Lee Jae-myung, who was seen as the successor to former President Moon Jae-in, not only announced earlier that he would accept cryptocurrency as a political donation for his campaign, but also said he would mint NFTs for campaign donors as proof of donation and memorabilia. The NFTs issued will also include Lee Jae-myung's photos and political views.

Perhaps politicians are just using their pro-cryptocurrency measures as a stepping stone in their political careers, but in some parts of the world, the existence of cryptocurrency is no different than bread and future for the locals.

Related reading: "In these countries, Web3.0 is their bread and butter tomorrow."

The Bitcoin experiment in El Salvador, how is it going now?

The beauty of encryption lies in its decentralized and autonomous technology. Javier Milei's preference for cryptocurrency is further enhanced by the specific characteristics of the current Argentine economy: long-term inflation and distrust of the government, which reduces the value of currency and drives people to other sources of value that are not controlled by the state.

This inevitably brings to mind the first country in the world to adopt Bitcoin as legal tender, El Salvador. On September 7, 2021, the law officially came into effect, making Bitcoin the country's official currency. El Salvador's ongoing Bitcoin "adventure experiment" has attracted attention from countries around the world.

Bitcoin's "adventure experiment" doesn't seem to have gone smoothly in its first year. After the Bitcoin Law was passed in 2021, rating agencies Moody's and Fitch both downgraded El Salvador's rating and removed it from the rating watch list (UCO), while the country's dollar-denominated bonds also faced pressure.

Related reading: "El Salvador's Bitcoin 'Adventure Experiment'".

According to a report from The Block in September 2022, based on the disclosed Bitcoin purchase information by Salvadoran President Nayib Bukele, their Bitcoin investment portfolio has lost about 58% of its book value, calculated based on the average purchase price and the value of Bitcoin earlier on September 7. A new poll result one month later showed that 77% of people believe that making Bitcoin a legal currency alongside the US dollar "is a failure" and the president "should not continue to use public funds to buy Bitcoin".

However, President Nayib Bukele was not affected by these events. In November 2022, he announced on social media that he would purchase one Bitcoin every day. Thanks to Nayib Bukele's persistence, two years later, as the price of Bitcoin rose from its lows, the "Bitcoin adventure experiment" in El Salvador underwent significant changes.

On January 24th of this year, the Salvadoran government repaid $800 million in maturing bonds, including all principal and interest. Some international bond investors in El Salvador claim to have received a return of 60% just this year, and even with such a high return, some believe it is still worth holding onto. In early August, a report on Latin American emerging markets research by JPMorgan Chase indicated that El Salvador's recent data has been generally optimistic, with the fiscal deficit continuing to trend downward.

Obviously, Salvadoran bonds have also caught the attention of Wall Street. JPMorgan, Eaton Vance, and PGIM Fixed Income, among others, have recommended or purchased Salvadoran national bonds and bet that the bond will continue to rise. According to Bloomberg data, Lord Abbett & Co LLC, Neuberger Berman Group LLC, and UBS Group AG have also purchased Salvadoran bonds since April.

Nayib Bukele has recently posted "I told you so" on social media multiple times, proudly showcasing his governance achievements. Nayib Bukele also claimed that since Bitcoin became legal tender, El Salvador's tourism industry has grown by 95%. Now, according to a new public opinion poll by TResearch, about 94% of Salvadorans plan to vote to support current President Nayib Bukele to continue serving as president.

Looking back, many of the doubts people had about El Salvador's Bitcoin experiment still exist today. However, El Salvador's contribution to stabilizing the economic order cannot be ignored, as it has gone from being rated by the media as the world's most dangerous country to a corner of Latin America where official reports show zero homicides.

The leading vote count of Javier Milei, the presidential candidate in Argentina who supports Bitcoin, also proves that Argentina may follow in the footsteps of El Salvador in the future.

Despite the volatility of Bitcoin that often makes investors nervous, compared to the economic turmoil in some third world countries, cryptocurrency is one of their few swords to break the deadlock. Perhaps what this generation of young people wants is just a stable income, so that their newly earned salary won't depreciate by 50%. Politicians use cryptocurrency as a tool for canvassing, but ordinary people who hold the power to vote just want to make their own choices for a visible future.

Reference:

1.https://www.theblock.co/post/226106/argentina-crypto-currency；

2.https://www.bloomberg.com/news/articles/2023-08-15/bitcoin-touting-bukele-s-bond-rally-draws-jpmorgan-eaton-vance#xj4y7vzkg；

3.https://www.imf.org/en/News/Articles/2023/02/10/el-salvador-staff-concluding-statement-of-the-2023-article-iv-mission；

4.https://www.gongfa.com/html/gongfazhuanti/bitebiyuqukuailianzhu/2014/0417/2589.html；

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