South Americans Use Bitcoin in Fight Against Corrupt Regimes
While sovereign currencies in Argentina, Venezuela and even Brazil perennially over inflate, their citizens, fed up of seeing their wealth disintegrate, now have Bitcoin (BTC) as a viable option against their governments’ economic misrepresentation.
Inflation is real in all government controlled, sovereign currencies. Even a 2% rise per year negatively impacts savers, especially now banks pay less than 1% interest.
South Americans are used to much higher rates of inflation, however, and corruption is rife throughout the continent. In Argentina, the population is regularly losing more than half their wealth on an annual basis.
This year alone the Argentinian peso has inflated by 51.4%, up slightly from 50.5% in 2018. Both years are nothing compared to 1990, where a high of over 20,000% and an average inflation of almost 7500% saw severe devastation for Argentinian citizens.
Venezuelans have had it even worse. Inflation rates in the oil rich country averaged 3743% from 1973 until 2019, and recently reached an all time high of 344510% in February 2019.
Even Brazil, a relatively stable economy in South America, is averaging 3.7% inflation this year. More durable when compared with its neighbours, but older Brazilians are only too aware of the economy crisis in the 1980s and 90s, where inflation topped at 6821% in 1990.
Added with the ceaseless government corruption, Brazilians are as fed up as the rest of the continent’s suffering inhabitants. But is Bitcoin a viable option for South Americans? Why not just save wealth in US Dollars?
Why Not Just Turn to the US Dollar?
Of course, the USD is arguably the safest fiat currency and inflates at a worldwide competitive rate. But there are major concerns about hyperinflation of the world’s reserve currency.
Morgan Creek Digital co-founder Anthony Pompliano questions whether it's more risky to hold US Dollar instead of Bitcoin. The Bitcoin bull was debating over a 200-year timespan, but with the USD almost 50 years old, it is already older than most fiat currencies historically last. And with the Fed's printing obsession, it seems likely to fall sooner than most think.
The Fed’s intervention in the repo market, quantitative easing in everything but name, shows no sign of stopping. Since starting in September this year, The Federal Reserve has pumped hundreds of billions of dollars socializing the banks to keep credit flowing through short-term loan markets.
And with many other nations choosing to trade in their own currencies rather than the USD, the need for the Greenback is fading. Added with the Fed’s insatiable appetite for printing, it seems an inevitability that the long-term value of the world’s go to currency is headed south at a much faster rate than we are accustomed with.
Argentinians can’t store much of their wealth in the US Dollar even if they wanted to. In October 2019, Argentina’s central bank restricted dollar purchases to $200 per month. Only a month after restricting it to $10,000 per month. A dramatic and desperate move indeed.
Governments Can't Restrict Bitcoin
These kinds of restrictions aren’t possible with Bitcoin. Governments can put restrictions on crypto exchanges, but with a VPN people can easily buy whatever cryptocurrency they choose.
LocalBitcoins, one of the biggest exchanges in South America, discussed the importance of Bitcoin in the region. In an interview, the exchange’s representative said Bitcoin was vital in regions where economic instability was the norm.
LocalBitcoins is different from exchanges and is a platform where buyers and sellers of Bitcoin meet to exchange Bitcoin for pretty much any global currency.
‘Bitcoin gives people autonomy over their own money,’ said a LocalBitcoins representative. ‘It enables easy and direct access into the global economy through a very efficient and reliable financial system.’
For many on the continent, Bitcoin is becoming a necessity, as it’s a way for them to get into the global financial system. Something that has evaded most of the unbanked population of South America.
Bitcoin Is Becoming Much More Accessible
Earlier this year, leading bank technology provider, Bantotal, partnered with cryptocurrency exchange Bitex to facilitate cross-border payments over the bitcoin blockchain. Using the Bitcoin blockchain, Bantotal will make cross border transactions much cheaper and faster for its 20 million users.
According to Bitex Exchange CMO Manuel Beaudroit, transfers are now significantly faster. In one case, he said, 'transaction time between Argentina and Paraguay dropped from one month to one hour after switching to Bitex’s cross-border payment services.
In Venezuela, business leaders are turning to Bitcoin as it has become a much more viable asset than the Bolivar. In Caracas shopkeepers accept BTC and turn away the useless bolivar.
Local businessman, John Villar, recently paid for flights, medication and his employees all in BTC. 'This is not a matter of politics,' he said. 'This is a matter of survival.'
The Venezuelan government even confiscated electrical stores it says were profiteering from the collapse and sold goods such as all the best amplifiers, TVs, and people were even seen walking out with dishwashers all bought at a discount.
Of course, the BTC price is volatile. But surely, after a lifetime of dissolving wealth, South Americans would rather put their trust in money that can’t be manipulated.
Some might say a stablecoin like USDT or even MakerDao’s DAI is a safer haven for someone wanting to store their wealth. In the short term, I think that’s feasible.
Obviously a currency tied to the dollar is less volatile than something that has seen its price rise by almost 400% before dropping almost 50% this year alone. But with the US Dollar and all other Fiat currencies being printed into oblivion, keeping money in stablecoins tied to them a risky game.
Bitcoin is the best performing asset this decade. Since 2010 it has gained almost 9 million percent, and is the best performing asset in 2019. But it's not necessarily the gains that is attracting Latin Americans to Bitcoin. The security, accessibility, and trustless nature of it is its main attraction. BTC's price stability is just a bonus that's never been available to them.