Michael J. Casey is the chairman of CoinDesk’s advisory board and a senior advisor for blockchain research at MIT’s Digital Currency Initiative.

The following article originally appeared in CoinDesk Weekly, a custom-curated newsletter delivered every Sunday exclusively to our subscribers.

When people ask me what got me into bitcoin, I often answer with one word: “Argentina. ”

Amid the sad news that the South American country is again gripped by a currency crisis, I’m getting a strong reminder of that connection.

Below, I explain it and explore one crypto team’s proposal for the Argentine government to overcome this latest meltdown with a stability-seeking strategy that partly includes bitcoin.

Over the past 30 years, Argentina has tried a diverse toolkit of mainstream economic solutions to its persistent drift into chaos, and each has failed. Perhaps a new, outside-the-box, crypto-friendly approach is needed. And with other emerging-market countries now suffering “contagion” from Argentina’s, Turkey’s and other developing countries’ woes, maybe there’s a lesson for the wider world too.

Love-hate

My Argentina-bitcoin connection stems from six years spent in Buenos Aires during the previous decade. While my family and I adored living there, we had a tortured, love-hate relationship with the country.

On the plus side, in addition to its great food, wine and culture, we made some of the best, most loving, loyal friends we’ve ever made in our adult lives in Argentina.

On the negative side: broken civil institutions and a history of corrupt governments ensured that a dysfunctional economy would repeatedly, almost inevitably, drift toward monetary crises. This stoked inflation and bred uncertainty, making it increasingly difficult to make economic plans.

Eventually, the latter problem forced us to leave. We wanted our kids to grow up in a society that offered greater long-term opportunities. Even after we’d made the decision to go, Argentina’s dysfunction almost destroyed us financially, when we struggled to get our life savings out of the country — as readers of Paul Vigna’s and my first book, The Age of Cryptocurrency, will know.

What does all this have to do with bitcoin? Well, it starts with the core social problem of trust, which, in essence, cryptocurrencies and blockchains strive to resolve with their unique, decentralized approach to recordkeeping and value exchange.

Both the positives and the negatives of our Argentine experience stem from this trust challenge. In Argentina, as with other societies with notoriously corrupt or failed institutions, strong personal bonds of trust are forged among family and friends because they provide a social safety net to help you secure your property and well-being against a wider system that can’t be trusted to protect them.

What’s lacking is a lasting social covenant between citizens and institutions of government, the kind that, in more functional economies, breeds the former’s trust in the latter. (Be warned, Americans, that covenant is not guaranteed forever. It can be destroyed.) It becomes entirely expected that government officials will rob the public purse. As a result, tax avoidance and graft are normalized and entrenched.

The crisis cycle

The ultimate measure of whether a society enjoys such a covenant is the stability of its fiat currency, whose value will evaporate if users don’t trust the government not to debase it in pursuit of its own interests. This is the core story of Argentina, whose habit of succumbing to a crisis every ten or so years has over time taken this resource-rich country from being one of the world’s wealthiest at the start of the 20th century to a byword for economic dysfunction.

Note: this is not per se a commentary on the government of President Mauricio Macri, which has, in my mind, pursued some of the more sensible policies of any in recent decades and has avoided turning the peso’s printing presses into a funding vehicle. The problem is that even the most well-intended, honest shooter of a president will struggle against this ingrained structure of mistrust and corruption.

So, with all of that as a relatively fresh experience, bitcoin came as a revelation when I finally grasped its central promise in 2013.

What if Argentines could outsource the record-keeping system underpinning their payments and value exchanges to a decentralized network that’s controlled not by mistrusted human institutions but by a common, censorship-resistant, math-driven protocol?

What if the teeming poor who fill the ever-growing shantytowns on the outskirts of Buenos Aires had a more trustworthy system for recording and monetizing their assets and identities?

What if a digital currency that’s easily available for electronic, cross-border transactions became these people’s go-to means of storing wealth, rather than greenbacks stored in hidden safety deposit boxes that can’t be easily moved offshore?

It turned out I wasn’t alone in thinking this way. Early bitcoin thought leaders such as Wences Casares and Andreas Antonopoulos were already articulating how cryptocurrencies would appeal to people in places with failed economic systems.

Their predictions have steadily played out. Argentina has become a hotbed of crypto development. Venezuela’s mining rigs are now legendary. And lately Turkey has seen a surge in demand for bitcoin.

A fix for government too?

But what if it wasn’t just private citizens turning to this technology as a fix, but governments?

Enter Santiago Siri, a San Francisco-based blockchain technology enthusiast who’s best known for his work developing the voting platform Democracy Earth. Siri’s heading back to his native Argentina later this month with a proposal for Luis Caputo, the President of Argentina’s Central Bank.

His idea, announced in a tweet (in Spanish) last month, is that the central bank place up to one percent of its national reserves in bitcoin. It’s a modest idea, but with potentially significant ramifications.

Because of its focus on reserves, which developing countries use as a buffer to help stabilize their currencies, it might be tempting to compare this strategy to Argentina’s past dollar-focused models, including the infamous “convertibility plan” of the 1990s. Under that model, the Argentine peso was rigidly pegged one-to-one to the dollar via a constitutional commitment to hold at least the equivalent value of its money supply in U.S. currency reserves.

This “currency board” arrangement worked well for a few years. However, its fatal flaw — the misalignment of Argentina’s and the United States’ economic interests — was exposed when the U.S. Federal Reserve began aggressively hiking interest rates at the worst possible time for Argentina’s then-slowing economy.

The local currency became heavily overvalued relative to its economic health — ultimately, unsustainably so. The peg broke, essentially bankrupting the country, and setting forth a pendulum swing that took the country from a heavily deflationary environment to the unsustainable inflationary situation of the present.

Siri’s proposal has no such extreme pegging concepts behind it. It would simply add more diversity to the central bank’s reserves. But by exposing some of the nation’s official reserve holdings to a cryptocurrency that many of its people are increasingly holding, and shifting some of it away from U.S. policy-dependent dollars, there would, in effect, be a modest aligning of interests. Siri also suggests the government use some its large nuclear power capacity to engage in state-owned bitcoin mining to cheaply expand its reserves.

Pro-innovation signal

As modest as it, a nod toward bitcoin of this kind could be meaningful for the country, signaling support for financial innovation and for decentralized models that reinforce public confidence.

And while the downside of price volatility is limited by the one-percent cap, the upside financial boost could be significant if, as Siri expects, bitcoin rallies when foreign governments start abandoning dollars in the midst of a mounting global trade war.

Putting one percent of its reserves in bitcoin, Siri estimates, would leave the country holding a hefty 0.5 percent of the total float for the cryptocurrency, giving it “first mover” advantages.

The proposal raises as many challenging questions as it answers, including how ownership of the nation’s private keys will be defined. (Siri has flagged the idea of the presidency and the central bank sharing a multi-sig wallet.) He is also proposing changes to Argentine law, including to custodianship rules and those dealing with the tax treatment of crypto.

A move of this kind would be a noteworthy departure from the fiat-centric orthodoxy of traditional economists. But for a country that has tried these experts’ prescriptions from across the spectrum of economic beliefs, maybe it’s time to look outside the mainstream.

Argentine banknotes image via Shutterstock