Argentina, a country hit by sky-high inflation, limits Bitcoin traders from buying US dollars at the official exchange rate in an attempt to tame capital flight.
In a Thursday announcement, the country’s central bank said so that those who have bought Bitcoin or other digital assets in the last 90 days with pesos will not be able to access the single free currency market (Mercado Único y Libre de Cambio—MULC) and buy dollars at the official rate.
The idea is to stop money from leaving the country – something that can easily be done with cryptocurrency and dollars. If a person or company has pesos in their account and they use them to buy US dollars from a regulated exchange, they can use those dollars to invest in cryptocurrencies like Bitcoin.
This would mean that the US dollar would sort of leave the country, which would be bad for Argentina’s economy. In the South American nation – which has the third largest economy in Latin America – the country’s centre-left administration of President Alberto Fernandez is tightening currency controls and raising interest rates to control inflation.
Argentina has one of the highest inflation rates in the world. Right now, annual inflation in the South American country is 64%, according to the central bank. It is the second highest in the region after crisis-hit Venezuela, which has the highest inflation rate in the world.
Crypto is big in Argentina because of the country’s inflation rate: Bitcoin is arguably a better bet than the Argentine peso, which is quickly losing value as a currency. Bitcoiners have long argued that the asset acts as a hedge against inflation because supply of the digital coin is limited to 21 million. And supporters who Human Rights Foundation routinely point to the troubled economies of South America as places where Bitcoin finds its true use case.
In May, Argentina’s largest bank, Buenos Aires-based Banco Galicia, launched a crypto service for customers that makes Bitcoin, Ethereum, USD Coin and XRP available for purchase – a service that may not be as popular now with the central bank’s new restrictions.
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