Capital Controls in Argentina Open the Door for Bitcoin

September 4, 2019 / by Crypto.IQ

Amidst a turbulent year during which the Argentine fiat currency – the Peso (ARS) – has lost over half of its value against the U.S. dollar, the country has announced the enforcement of new capital control measures, limiting citizens’ and businesses’ freedom to buy foreign currency.

As reported on September 1st, the central bank imposed restrictions on businesses following a decline of over 25% in the value of the peso since local elections last month. The government’s decision comes after the BCRA lost $3 billion in reserves late last week.

The president of Argentina, Mauricio Macri, recently signed the bill that introduced limitations on foreign currency purchases. According to the new measures, large exporters will be required to obtain permission from the central bank of Argentina to buy foreign currency and transfer it abroad.

In addition to that, companies as well as banks must seek authorization to sell ARS for foreign currency, and individuals will not be allowed to buy over $10,000 per month. This measure will be in effect until December 31st, 2019.

In August, the Argentine peso and government bonds collapsed amidst the crushing defeat of incumbent President Mauricio Macri in the primary. At some point, on local exchanges Bitcoin was trading $300 higher than the average market price.

Meanwhile, a further decline in the peso threatens hyperinflation, which will certainly force many citizens to look for alternative ways to save money. Cryptocurrency may serve the need in this situation. According to volume data on localbitcoins for the Argentine peso, Bitcoin purchasing has surged this year. It peaked in July topping $15 million for the week and has been high in August at over $12 million.

The new capital control measures represent an improvement from older laws which required a purchase limit for individuals of $2,000. It also removes a hurdle that required individuals to present to the country’s revenue service (AFIP) evidence to justify their income before they can buy dollars.

Whilst Argentineans are now legally barred from purchasing above $10,000 monthly, Bitcoin does not place a cap on the number of units that anyone can hold. Additionally, there is no limit to the amount that can be transacted within a particular time frame.

Billionaire investor and Bitcoin proponent Tim Draper even met with the country’s president earlier this year to bet on Bitcoin outperforming ARS. Should Draper win, he demanded Argentina adopts Bitcoin as its new official state currency.

Either way, the latest capital control measures have highlighted Bitcoin’s strength and raised hope that soon, more than a few Argentines will consider the cryptocurrency as a ‘safe-haven asset’ amidst the growing economic uncertainties.