DeutschWorldwide, crypto users have been waiting for years for clear rules on topics such as regulation and taxation. It should not be forgotten that there are not only positive expectations about how the situation on the market will change when states ensure a clear legal situation. Because it is by no means the case that only pleasing developments are expected as a result of state regulations. After all, some Bitcoin owners or holders of other digital currencies expressly see the blessing of the systems in the fact that countries have so far kept a low profile legally. Last week, Argentina’s President Alberto Fernandez commented on Bitcoin with a current assessment. The reports are once again causing discussions. If it were up to real “hardliners”, politics would continue to refrain from taking measures and leave the crypto world to its own devices. For some time now, there have been efforts in many places to create clear guidelines for the market. These activities are not always so pleasing that they meet with approval in the community. It is all the more astonishing that Latin America (and not China, the USA or Europe) is one step further in its considerations and actions. The reasons are obvious.
China is a “good” negative example. Bitcoin miners in particular have been struggling for years with restrictions that make their lives difficult. The statements of the Argentinian president, on the other hand, are different from the recent assessments of many governments. Reason enough to take a closer look at the positions of some other countries in the next sections, in addition to the assessments of the President of Argentina.
Surprising Statement by the Head of State on BTC
While China, several European countries and the USA still see primarily the risks of cryptocurrencies, Fernandez emphasized in particular the good qualities of Bitcoin. First and foremost is the application of the digital currency, which is important in terms of market capitalization, as an instrument in the fight against the high inflation rate in the South American country for years. In a conversation with the local TV station Filo News, the president of the economically troubled country presented himself as open to the use of leading cryptocurrencies to get the economic problem under control. Inflation concerns have been around for a long time; government interventions continue to prove largely ineffective. Bitcoin as legal tender? Fernandez considers this option to be quite conceivable and a possible approach. The president is likely to be pushing at an open door with parts of the population.
As in various other countries with enormous inflation rates – such as Turkey – Bitcoin and the crypto sector as a whole are very popular, for example to send or receive money cheaply across borders.
President of Argentina Open to Bitcoin as a Means of Payment
Alberto Fernandez, President of Argentina, is open to introducing Bitcoin as legal tender to combat inflation. As I said, the step towards this potential recognition is not only a signal for Bitcoin that could leave its mark worldwide. According to the President, the leading crypto currency could be a solution for Argentina’s strained economy. The reason for Fernandez’s statement was the question raised in the conversation as to what extent the head of state could imagine the BTC introduction along the lines of the Central American state of El Salvador. They are already one step further in this regard. Although Argentina’s president did not generally allow himself to be drawn into a pro-Bitcoin answer, a no could not be justified, according to the reaction. El Salvador, by the way, suffers from an extremely high inflation rate like Argentina – in the case of Argentina, this was recently stated at almost 52 percent as part of a Trading Economics analysis.
The Clear Line is Still Missing in the BTC Classification
The Argentinian crypto boom can be explained, among other things, by very massive exchange controls. They have gradually created a steadily growing black market for digital currencies. What the country needs is a reliable and stable store of value. According to President Fernandez, Bitcoin could be exactly this requirement. In this assessment, the politician referred to the inflation security of Bitcoin. However, Fernandez himself sees reason for worldwide discussions about the benefits of the cryptocurrency and expressed himself cautiously. Miguel Pesce, president of the Argentinian central bank, recently gave a less positive assessment. Pesce does not see BTC as a model that does not allow hope for constant profitability.
Digital Currencies Secure Access to New Financial Systems
Against this unclear background, it is worth taking a look at the situation in South America in general. Many countries in the region are under economic pressure due to high unemployment and inflation rates. The Corona pandemic has further exacerbated this problematic situation since the beginning of 2020. Many users on site therefore now understand cryptocurrencies as real alternatives to their national currencies. However, users do not only benefit from the value stability. At the same time, many crypto users only get access to banking services through digital financial instruments. People without their own account and with little money in particular recognize the possible applications. Cryptocurrencies such as Bitcoin, but also altcoins such as Litecoin, are becoming more popular. Because they allow fast, cheap and at the same time secure transactions within the countries and across borders.
Incidentally, there is a clear parallel to many African countries – even there, many people do not have bank accounts, but they do have a mobile device. An ideal breeding ground for an increase in the number of users in the crypto sector.
Latin American Countries with Enormous Crypto Growth
Current statistics now show Latin America as the region with the highest concentration of crypto users per capita worldwide. States such as Colombia, Chile or Argentina have long been at the forefront of countries with the largest number of crypto users. In the so-called “Third World”, the emergence of numerous platforms and companies that rely on digital currencies and blockchain technology has gradually influenced the traditional system of the financial world and led to sometimes massive changes. A positive aspect of this trend is that the financial system is offering more and more equal opportunities. It is thus becoming more democratic and financial services are becoming cheaper. And the effects are also evident in the international context. World Bank data recently showed that there is an increase of 6.5 percent in remittances to Latin America.
Cryptocurrencies are suitable for people living abroad and the so-called “migrant workers” from the region to send money home cheaply. Companies like Skrill (the current No. 1 among all payment services in South America) did not start crypto services for no reason some time ago.
El Salvador Wants to Take on a Global Leadership Role
El Salvador’s announcement to accept BTC as legal/state means of payment could find many imitators in the direct neighborhood of Latin America. In addition, the acceptance from the highest level in the country itself creates important trust on the part of those who are interested in digital currencies but have refrained from joining due to a lack of assessments from politicians. The support of the Bitcoin network and thus the technologies of the industry as a whole could spread and create many new companies. This in turn would create more competition, which in turn would have positive consequences for users. South America as a new “crypto power”? In view of the developments in the region, this seems increasingly likely. Apart from the payment options, many unemployed or low-income users could also generate an income in a passive way – for example through staking or crypto lending.
Worth reading: The suburban report from El Salvador, whether and how Bitcoin has already arrived in society
Bitcoin Acceptance in Latin America – Two Sides of a Coin
For prospective users, however, the positive developments in the context of an expected greater crypto acceptance outweigh the negative ones. El Salvador will be the first country to officially allow Bitcoin when the bill submitted by President Nayib Bukele is passed by Congress. Nobody can take this title away from the small country. In addition, an important new labor market could emerge locally. For traditional banks, such considerations are initially more negative. They see themselves facing strong competition from the crypto sector and are forced to deal with innovative technologies. Despite some advances in the banking world (such as the US bank JP Morgan’s own stablecoin JPM Coin), the vast majority of banks are reluctant. Countries like China or Russia are more likely to develop their own cryptocurrencies and have for years considered Bitcoin and Co. to be a threat to fiat currencies and traditional banking systems.
State Approval as a Threat to Crypto Independence?
Regardless of the advantages of future state acceptance for Bitcoin and later probably other digital coins and tokens, two risks must not be forgotten. On the one hand, increasing numbers of users would most likely lead to a gradual increase in crypto prices, which would later make it more difficult for people with low incomes to acquire them. On the other hand, other states would be forced to act. Strict regulations threaten here, in the worst case even final bans. At the same time, digital currency systems run the risk of gradually losing a characteristic that is important not only for crypto fans from the very beginning through state acceptance: decentralization. Because it is more than unlikely that governments will allow Bitcoin and Altcoins as a means of payment without any influence. According to many experts, however, it will ultimately take several years before cryptocurrencies are recognized around the globe as an equivalent model alongside fiat currencies.
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