Argentina has legalized the use of Bitcoin to settle contracts. The Argentine government ratified the “Bases for the Reconstruction of the Argentine Economy” decree on December 20 as a part of a larger economic reform and deregulation.
Even though the decree did not specifically mention cryptocurrencies, it contained provisions that allow people and businesses to make payments in non-traditional currencies.
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Argentine Minister of Foreign Affairs, International Trade and Worship Diana Mondino announced the move on X on December 21.
“We ratify and confirm that in Argentina, contracts can be agreed upon in Bitcoin. And also in any other cryptocurrency and kind, such as kilograms of beef or liters of milk. Article 766 – Obligation of the debtor. The debtor must deliver the corresponding amount of the designated currency, whether the currency has legal tender in the Republic or not.” She said.
With the legalization of Bitcoin, Argentina aims to provide its citizens with wider financial alternatives when investing and developing their businesses within the country.
Ledn Inc. co-founder Mauricio Di Bartolomeo had previously expressed his confidence about using digital currencies in the country. “Argentinians will be able to legally transact in bitcoin and stablecoins very soon,” he said.
In terms of global impact, Argentina’s decision provides crucial implications. As the second largest economy in Latin America, Argentina may contribute to the widespread use of cryptocurrencies. Other countries might explore similar measures to increase economic flexibility and innovation based on the potential of cryptocurrencies.
🚨 NEWS: 🇦🇷 Argentina’s Foreign Minister confirms contracts can be agreed in #Bitcoin pic.twitter.com/voxalDuiHn
— BlockNews.com (@blocknewsdotcom) December 21, 2023
Argentina’s financial crisis
Argentina’s decision aligns with its newly-elected President Javier Milei’s views on monetary policy. In his campaign, Milei emphasized the use of Bitcoin to facilitate the “return of money to its original creator, the private sector.” He also heavily criticized the Central Bank for imposing inflationary taxes and serving political interests.
Over the past year, Argentina’s economy has suffered greatly, with extremely high inflation of over 140 percent. On December 12, Milei announced a significant devaluation of the Argentine peso (ARS) and the reductions of energy and transport subsidies.
The decision will cause the Argentine peso to devalue by 50 percent, from 400 pesos to 800 pesos per U.S. dollar. According to Milei, the country does not have enough time to consider other alternatives. Furthermore, Economy Minister Luis Caputo said, “For a few months, we’re going to be worse than before.” He also added the country is prone to fiscal deficits.
With this situation, many Argentines have adopted Milei’s new cryptocurrency path. They have resorted to Bitcoin and other cryptocurrencies to protect against the peso’s devaluation. Cryptocurrencies present a respectable and growingly popular substitute following the access restrictions to foreign currencies.
Additionally, using Bitcoin could greatly affect Argentina’s debt management plan, especially for the $45 billion the country owes the IMF. Integrating Bitcoin into the economy could offer financial flexibility as important payment deadlines approach.
It is worth noting, however, that the transition also brings some challenges because cryptocurrencies are also prone to volatility. Experts continue to debate how effective this strategy will be in stabilizing the economy in the long run.
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