Explore Argentina’s Peso history, its ties to El Salvador’s Bitcoin move, and the quest for dollarization amid economic challenges.
Argentina has some positive news for the cryptocurrency markets. In reality, it seems as though the nation is headed in the same direction as El Salvador.
The course El Salvador took
El Salvador is a developing nation that has always been underdeveloped. As a result, its history is distinct from that of Argentina, which was anything from a developing nation up until a century ago.
But both have experienced issues with their own national currencies.
Nearly 200 years ago, in 1841, the Republic of El Salvador was established, and up until 2000, the Salvadoran Colón (SVC) served as its official currency.
The colon’s exchange rate was fixed at USD 1 = SVC 8.75 on January 1, 2001, thereby becoming the US dollar the country’s official reserve currency. Within a few months, however, the national currency of El Salvador had ceased to be used in the country. In a process known as dollarisation, the US dollar took its place.
The colon, a defunct national currency, the US dollar, and bitcoin are now officially recognized as legal cash in El Salvador. Twenty years later, in 2021, bitcoin was also declared legal tender.
However, it should be highlighted that despite the rise of Bitcoin, dollarization has not changed at all because the dollar is still by far the most extensively used currency. The colon was worth $2 when it was first introduced in 1892, but it rapidly lost value due to consecutive economic crises and poor central bank management. In 2001, its worth had decreased to $0.114, a 94% loss in just over a century, as opposed to a dollar’s 96% drop in purchasing power during the same time period.In other words, over the years, the colon’s purchasing power has all but vanished.
Crypto news: the state of affairs in Argentina
The Peso (ARS), the national currency of Argentina, is going through a situation similar to the Colon in El Salvador.
The Peso National, which was first founded in 1881 from the Spanish Peso, has lost value over time.
In 1970, the peso ley (ARL), worth 100 pesos nacional, was issued. In 1983, the Argentine peso (ARP), worth 10,000 ARL, was introduced.
The current New Peso (ARS), which is convertible to dollars, was first adopted in 1992. 1 ARS was equal to 1 USD at the time.
In contrast, 1 ARS is now only worth $0.0029, a 99% decline in value in just 30 years.
It is hardly surprising that Argentina is exploring dollarization given its difficult past of economic crises and improper monetary management by the central bank.
Making the Argentine peso disappear in order to effectively replace it with the US dollar and make it the nation’s legal tender appears to be the same objective as in El Salvador.
Potentially, a new President
Argentina’s first round of the presidential election will be held on October 22.
Javier Milei, who is currently leading the polls, has already declared that if he wins, he will move on with dollarization. In addition, the Argentine peso is in such bad shape that any victorious candidate may easily adopt dollarisation.
Milei does, however, support bitcoin as well.
In light of this, if he wins, as recent polls would appear to suggest, Argentina may decide to legalize bitcoin in addition to abandoning its own currency and moving toward dollarization.
It should be emphasized that El Salvador only has 6.5 million people, but Argentina has over 46 million people.
Furthermore, El Salvador’s GDP is 26 times lower than Argentina’s, despite the latter being substantially less poor overall.
Let’s just suppose that Argentine GDP per capita is $13,600 while El Salvador’s is still only $3,800.
This does not place it on the list of wealthy nations, but it is undoubtedly considerably more advanced than El Salvador.
The impact on cryptocurrency markets is the most recent fascinating news from Argentina
These data, however, indicate that the actual impact on the cryptocurrency markets may not be very significant.
Even the speculative news that bitcoin would eventually be accepted as legal cash in Argentina could have a big impact. Although it would only have a short-term effect and might not even be very significant, it could serve as a model for other states in similar circumstances.
Only the Central African Republic and El Salvador have made bitcoin legal money as of right now, but there are other sizable states, like Turkey, where the national currency is under intense assault.
There are some other countries, like Venezuela, where the local currency is experiencing the same demise as the Argentine peso or the El Salvador colon.
If Milei prevails, a lot will be revealed in October. On the other hand, it will likely take a while before Argentina can make the next move following dollarization, which might be the legalization of bitcoin.
