In the early-2000s, the Argentine economy went through a severe crisis, causing Argentina to default on its foreign debt and place strict controls on currency. While Argentina’s economy quickly recovered over the next few years, the Argentine Peso remains famously unstable, passing through periods of rapid inflation and deflation.
Why Are Argentines Bitcoin Early Adopters?
As a result of the instability, Argentines became some of the earliest adopters of cryptocurrency in Latin America – and the world – in an effort to protect their savings against inflation. With an inflation rate of 32% per year (or higher) and a restrictive foreign exchange policy, Argentina was a prime location for cryptocurrency adoption.
Buenos Aires currently beats out most global cities for businesses that accept Bitcoin, with 6.1 businesses that accept Bitcoin per one million people, while New York has just 4.7 Bitcoin-accepting businesses per one million people. However, the Argentine government does not necessarily sanction investment in cryptocurrencies. The Argentine Parliament does recognize cryptocurrency, but they see it as property rather than currency. Bitcoin and other cryptocurrencies are currently legal in Argentina, and the country reportedly installed as many as 200 Bitcoin ATMs last year.
Blockchain startups in Argentina
Beyond cryptocurrency, Argentina has also become a hotbed for blockchain startups that are using this new technology to revolutionize contracts, finance, and fundraising. Just last month, RSK Labs, a software development firm in Buenos Aires, announced a partnership with the Universidad de Buenos Aires (UBA) to provide courses in blockchain technology as a part of their Information Engineering program. RSK Labs also created Rootstock, a smart-contract platform that connects to the Bitcoin blockchain.
One of Latin America’s most prominent blockchain startups, Ripio, is also based in Argentina. Ripio helps small merchants process payments from international credit cards and Bitcoin using the blockchain, making online payments accessible for all. Last year, Ripio raised a US$400K Series A round, and their coin, the Ripio Credit Network, currently has a US$40.44M market cap.
Also active in Argentina’s blockchain market is CoinFabrik, a software development company that provides blockchain technology development as a service for other companies, including the development of smart contracts and hyper ledgers. Smart contracts are a standard application for blockchain tech in Argentina, where the legal system is antiquated and cumbersome. Digital notary startup Signatura is among several companies working to update the bloated judicial system in Argentina.
Xapo, the cryptocurrency wallet that is the largest custodian of Bitcoin in the world, was founded in Argentina. Wences Casares was a serial tech entrepreneur in Argentina before founding Xapo, which he has since moved to Silicon Valley. Casares has raised over US$40M for Xapo since he founded it and now sits on the boards of PayPal, Endeavor, and Kiva.
The Future of Blockchain in Argentina
The instability of the Argentine Peso has pushed ordinary citizens to adopt cryptocurrency and blockchain technologies much faster than other regions, even the US and Europe. Musicians, hotels, restaurants, and even supermarkets are making it possible to process payments in cryptocurrencies to avoid the absurdly high foreign exchange rates and to counter inflation. Members of Argentina’s judiciary branch are also starting to see the potential benefits of organizing smart contracts and other legal documentation on the blockchain.
While Argentina’s Bitcoin users barely factor into the worldwide total, the ease of use of cryptocurrencies in Argentina is far ahead some of its counterparts. As long as Argentina remains open to new technology, it will undoubtedly continue to lead its neighbors in the adoption of blockchain and crypto-technologies that improve the legal, financial, travel, and many other industries, potentially making lemonade out of its economic lemons.