In its renegotiations of a $57 billion 2018 loan with the International Monetary Fund (IMF), the Argentinian government is being pressured to hold back Bitcoin adoption in the highly indebted nation.
In brief
- The international inflammatory provision is part of a memorandum of understanding recently signed with the Argentine government.
- NGO ‘Bitcoin Argentina’ has requested an explanation for the controversial provision.
- The agreement with the IMF must be ratified by Congress and has already been approved by the Chamber of Deputies.
- Argentina registered a higher inflation rate than Venezuela in Feb. 2022.
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The foreign debt refinancing agreement signed between the IMF and the Latin American country contains a provision that discourages the use of Bitcoin, Litecoin and other cryptocurrencies. The request was included as part of the monetary and fiscal policy package which the nation has been committed to since 2018.
The sneaky language only came out when the agreement with the IMF was presented to the Argentine Congress for debate and approval, not before. Bitcoin and crypto communities and NGOs in the country reacted to the shocking provision, obliging the government to explain exactly how it intended t “discourage” the usage of cryptocurrencies in the country.
Data from ‘Chainalysis‘ shows that Argentina is among the top 10 countries in the world in terms of crypto adoption. The clause in the “Memorandum of Economic and Financial Policies”, which is part of the agreement signed with the financial institution and sent to Congress, expressly establishes the request.
To better safeguard financial stability, we are taking measures with the aim of discouraging the use of cryptocurrencies with a view to preventing money laundering, informality, and disintermediation,” the text states.
It continues, saying measures seek to “provide more support to the current payment digitization process to improve the efficiency and costs of payment and cash management systems; and safeguard the protection of the financial consumer”.
In other words the IMF is attempting to hamper crypto adoption by manipulating free market rules. This begs the question: why does an organisation that does not represent Argentina have any say in what the Argentinians choose to use as money?
The IMF Fears the Worst
In September 2021, El Salvador passed a historic law requiring businesses to accept Bitcoin in exchange for goods and services. The international organisation outlined its fears that countries might essentially take the El Salvador route and bypass the institution given cryptos ease of access and usage.
“Some countries may be tempted by a shortcut of adopting crypto assets as national currencies. Many are indeed secure, easy to access, and cheap to transact. We believe, however, that in most cases risks and costs outweigh potential benefits.”
In the blog post, the IMF also pointed out that widespread use of crypto would threaten “macroeconomic stability” and could harm financial integrity.
More Countries to Make BTC legal Tender?
Earlier this year, El Salvadorian President Nayib Bukele made 6 crypto-related predictions. Among them was that another two countries would adopt Bitcoin as legal tender in 2022.
Could debt-ridden Argentina be next in line?
El Salvador became the first country to make history when it regularised bitcoin as legal tender in September 2021.
Inflation Bites Argentinians
Argentina currently has the highest inflation rate in Latin America, hitting 4.7% in February. The figure is even higher than Venezuela, which has an annual rate of 684% – the highest on earth. The country has been subjected to constant devaluation of its national currency through corrupt practices exacerbated by unpayable debt obligations. Many Argentinians are choosing cryptocurrencies for this reason.
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