Between the characteristic Latin American lifestyle, the friendly people and the buzzing nightlife, Argentina is a joy to visit. For locals, however, it’s not an easy place to live in. For the eighth time in its 209-year history and the second time in the past 13 years, the country finds itself entering into billions of dollars worth of debt.

In short, the Argentinian economy isn’t doing well at all. Reuters expects its inflation level to reach 53 percent by December 2019, and regardless of the policies set by the past administration (led by the reform-minded and recently-ousted Mauricio Macri), the economy doesn’t seem to be getting any better.

Argentina’s Dollar Dependency and Its Many Facets

To outside observers, perhaps one of the biggest financial quandaries that Argentina faces is its overdependence on the U.S. dollar. In 2014, The Washington Post reported that there was up to $50 billion stashed in cash and dollar-denominated bank accounts domiciled in Argentina. The reason why is not hard to guess: When you live in an economically challenged country, you’ll look for ways to preserve your wealth.

The country’s peso is a hot mess, and instead of struggling with shaky values and fluctuating exchange rates, its citizens have done what many other citizens in debt-ridden countries do: convert their currency to dollars to find some semblance of stability.

In an interview with Bitcoin Magazine, Eduardo Gomez, the head of support at bitcoin-backed savings platform Purse.io, said Argentines are buying bitcoin for different reasons.

“From 2015 to 2019, trading volumes for bitcoin went up on platforms like LocalBitcoins, Ripio, etc. — mainly due to retail interest and speculation, but also to hide wealth from the government,” he said.

Dollar-hoarding has made it difficult for Argentina’s central bank to build its own dollar savings, which has led to a significant drop in the country’s foreign reserves. The same problem has also caused some producers and manufacturers in the country to hoard products. They see selling as unwise, as they believe that a devaluation of the peso is always around the corner.

Currency Restrictions Could Bring More Bitcoin to Argentina

The first round of new elections in Argentina was held on October 27, 2019, and it saw Alberto Fernández, a 60-year-old former chief of the cabinet of ministers, emerge victorious. Fernández didn’t have much time to revel in his victory, as he immediately rolled out his first major macroeconomic policy, tightening currency controls even further.

Argentina’s central bank cut the amount of dollars that individuals could buy to $200 per month via bank account and $100 in cash until December 2019, down from a $10,000 limit imposed in September 2019.

As a result, blockchain companies are gearing up for a harvest. Diego Gutiérrez Zaldívar of IOV Labs — the parent company of Latin American social network Taringa and the company that powers the RSK ecosystem — said he believes that this ban would be beneficial for Bitcoin.

“This new forex restrictions in Argentina are very important for Bitcoin,” he told Bitcoin Magazine. “Every time the friction of the traditional financial system grows in the form of capital or forex controls, Argentines seek for alternatives. The traditional alternative for the middle class was always the U.S. dollar and OTC exchanges, but more and more, bitcoin is also becoming an alternative.”

While Argentines seem to have lost faith in their own fiat currency, this restriction will strain their ability to store wealth. In a country where the average family stockpiles groceries for fear of wild price swings, bitcoin can be a saving grace.

Argentina Can Still Thrive With Bitcoin

Latin America has proven to be a testing ground for the application of cryptocurrencies as safe havens during economic turmoil (see Venezuela), and the trend is spreading to Argentina. The country is filled with an abundance of local exchanges, bitcoin brokers and other blockchain startups in search of users who want to adopt cryptocurrency.

“Argentines don’t trust the pesos,” Santiago Molins, a Argentina-based cryptocurrency specialist and entrepreneur, told Bitcoin Magazine. “Our inflation can peak 30 percent in one day, so most people buy food and stock up in case prices rise.”

This uncertainty is driving Argentines to the many bitcoin access points available to them. From centralized exchanges to P2P platforms to bitcoin ATMs, there’s a variety of ways in which Argentines can purchase bitcoin.

According to CoinATMRadar, Argentina has about 11 bitcoin ATMs concentrated in its capital Buenos Aires. And in the week following Fernández’s victory, the trading volume for LocalBitcoins in Argentina amounted to 14.15 million pesos (worth about $240,000), marking the country’s third-highest volume week in history, even while some brokers were selling at higher premiums.

Opportunities for Bitcoin in Argentina

Despite the recent dollar restrictions, local exchanges are not apprehensive about serving customers. Speaking with Bitcoin Magazine, Manuel Beaudroit, the chief marketing officer of Latin America-focused exchange Bitex, said that since the local exchanges transact in pesos, restrictions don’t bother or affect it. It has also witnessed a spike in its volumes since August 2019.

“Successive economic and social turmoil have created the perfect conditions for startups in the crypto ecosystem to thrive and flourish; this demonstrates our natural predisposition for solving this endemic problem by using blockchain technology,” Beaudroit said. “Hopefully, we will be the generation who will end this problem.”

Bitex has been doing its bit to promote Bitcoin adoption in Argentina. In 2018, it partnered with Argentinian bank Banco Masventas to enable customers to process international payments speedily through Bitcoin’s blockchain. Beaudroit said the service is now live in four countries: Argentina, Chile, Paraguay and Uruguay.

For Zaldívar, the new forex controls couldn’t come at a better time for Taringa. According to Zaldívar, the social network site has a strong Argentinian base that is growing, possibly motivated by declining trust in the federal economy.

“Part of our plan for the social network is to give every user a crypto wallet that will support bitcoin and all the stable assets created on the RSK Network,” said Zaldívar. “Once that’s in place, we will integrate a revenue-sharing mechanism with the community that will turn the social network into an open sharing economy.”