Argentina’s New Foreign Currency Regulation Save The Economy
Cryptocurrencies Act As A Shadow
A nation that has always had a strong foreign currency control strategy has now reduced the purchasing of the US dollar. Argentina did not legally regulate the cryptocurrency, but the announcement by the central government this Sunday had a huge impact on the crypto market.
Argentina is now facing a dependent economic crisis. To put an end to the process of dependence on another country, especially the USA, this decision not only restores the situation but also affects the cryptocurrency market.
The country currently regulates the monthly purchase of the US dollar and attempts to convert people to the national fiat currency, Peso. This restriction is indirectly related to the rise in the market price of cryptocurrencies.
Until I explain the new law and its impact on cryptocurrencies, you need to know the reason behind it.
Why Is Argentina Facing Economic Challenges?
Argentina’s fiat currency has recently faced a downturn on the US dollar. This shows the country’s economic status.
The recent primary presidential poll is said to be the main reason behind the decline in the country’s economy. Mr. Macri’s election promise includes accelerating the economy of Argentina. From the first quarter of 2019, however, the country experienced an economic contraction of 5.8%. Many people crossed the poverty line. Which is not good news for the economic backbone of the country.
The drastic situation is a result of Incoordination between the fiscal system and the monetary system. And also the debt from the International monetary fund is another reason for the fall. This acts results in the collapse of the banking system in Argentina.
New Foreign Currency Regulation
In Argentina, the most popular foreign currency is USD, which is now limited to monthly purchases. The government of Argentina has taken such a step to facilitate the Peso. Currency stability has now become the main concern in Argentina. The jump in the adoption of the peso is now capped at $200 monthly purchase of the US dollar. The recent declaration from the central bank of Argentina stated that the steps are taken to “maintain exchange stability and protect reserves.” It also added in the statement, “People who bought more than USD 200 in October and less than USD 10,000 will not be penalized”.
Previously, the limit remained at $10,000, but given the country’s current economic status, there was an urgent need to reduce the US dollar perchance. Immediately, the cap amount dropped to $200 from $10,000. One must obtain permission from the government for further purchase. Nevertheless, those who have paid more than $200 in UD dollars are free from legal proceedings.
To overcome the economic crisis, it is only acceptable to reduce the purchase of the dollar. Cutting down the purchase of a dollar will automatically boost the function of the peso. This could somehow regain the prestige of the program. Nevertheless, Argentina urges the IMF to extend the debt period. If that happens, Argentina can hope for a rebound. Otherwise, the county is on the brink of recession.
Now I’m going to discuss the cryptocurrency regulatory situation in Argentina.
Argentina’s Legal Position On Cryptocurrencies
While Argentina is said to be a crypto-friendly state, there is a law stating that cryptocurrencies are not legal tenders. The Argentine Financial Information Unit (UIF) claimed in a statement that bitcoin and cryptocurrencies may be used as currency, but the government does not accept the lawfulness. So dealing with or trading with these illegal currencies may not send anyone to jail, but they can not guarantee or insured revenue loss.
Argentina may not consider cryptocurrencies to be a legal entity, but profit from cryptocurrency trading is considered to be income. So if a person makes a cryptocurrency investment, he or she is liable to pay tax. Recent updates on cryptocurrencies have reported that income derived from the selling of digital currency is taxed at 15% if it is obtained from Argentine or foreign sources.
Argentina also issued a warning statement on and threat to ICOs. Even though I cryptocurrencies are not regulated in the country but the government has declared its legal status towards cryptocurrencies and risk around it.
Crypto Business Interaction With New Currency Control Legislation
Currency control legislation that limits the purchasing of US Dollars under $200 has a strong impact on the trading status of cryptocurrencies. See the relationship between BTC and ARS if peso doesn’t work properly. This chart shows data from coingecko.com for 7 weeks.
The relationship between Peso and Ethereum and Bitcoin is quite close to the dollar. If the dollar is controlled in Argentina, then the use of peso will increase, reflecting a positive effect on Argentina’s economy.
What Effect It Had On The Crypto Market?
Soon after the declaration of the Argentinian government’s declaration of regulation, the crypto market saw a positive change. Bitcoin went up after lowering the purchase of the dollar in Argentina. According to data from Coin Dance, ARS 14.15 million ($240,000) will change hands for seven days ending October. The law will apply until the next presidential election in December 2019.
Was It The Right Decision?
The prohibition on dollar sales beyond thresholds demonstrates a positive rise in the crypto industry. This also accelerates the adoption of the peso. The more the peso enters into the public flow, the growth of the economy will see an enhanced situation from the current one. The impact of the decision will be seen shortly before the end of the year. It is hoped that this financial strategy will restore Argentina’s economic condition.
Argentina Government And Blockchain Technology
The Government of Argentina believes that the acceptance of cryptocurrency will reduce the need for USD which is itself a clever idea. Stopping the adoption of the dollar can only be achieved if the government extends its crypto-adoption arm. Decreasing the demand for USD would increase the rate of adoption of the peso.
The execution of the government plan has been related to the transfer of Binance. The company is set to launch about ten blockchain projects across the country. The LatamEX Founders Lab is also working with Binance Lab on this venture.
Latin American country Argentina seems to have an idle spot for blockchain development. The thought was reflected in a statement from the CEO or LatamEX Founders Lab.
Pablo Orlando said,
“Latin America presents one of the most attractive markets for blockchain adoption and real use cases and Argentina is leading the way by serving as the market-opening gateway”.
Binance Lab’s head also stated,
“We are very excited to support blockchain projects, entrepreneurs and developers through our Buenos Aires chapter, to advise and mentor them, to find product-market fit, and provide them with in-time access to global blockchain technology development to solve local problems.”
Another approach recently updated on the market in Argentina. The Singapore-based crypto exchange platform Huobi plans to extend its roots to the Argentinian market for the crypto industry. Huobi announced last month that it will open a crypto portal fiat in Argentina. Argentine Peso (ARS) is now acceptable for the purchase of cryptocurrencies.
However, a new approach will trigger ARS crypto trading. This will increase the market value of the peso and will stabilize the economic status of the country. Huobi clouds enable the purchase of cryptos by credit card or any digital payment provider.
Carlos Banfi, CEO at Huobi Argentina, said,
“Argentina is South America’s most promising market for blockchain development. There already exists a consensus to break from reliance on the local currency and banks, and with Huobi’s entrance into the market, it is a great opportunity to move the needle on blockchain and crypto adoption in Argentina.”
Conclusion
Argentina is currently dealing with financial crises. The crypto industries see Argentina as a massive investment platform for the growth of the industry. During this crisis, only the crypto industries have stepped forward to help Argentina. Bitcoin could be the alternative to fiat currency and save the economy–Tim Draper thinks. Let’s see whether or not Argentina’s new regulatory plan will help the nation and the crypto industries.
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