Argentina - A new finance minister will likely leave Bitcoin and crypto companies alone
Silvina Batakis has bigger fish to fry right now
On 3 July, economist Silvina Batakis was brought in to fix Argentina’s economy after her predecessor Martín Guzman resigned in protest over political gridlock inside the Alberto Fernandez government. Batakis is new, but the gridlock is not, and it will continue in spite of her. That probably means that Bitcoin and crypto projects bubbling further below the surface will remain far off the new finance minister’s radar.
Batakis is a Peronist and close ally to the larger-than-life former president and current vice president Cristina Fernandez de Kirchner. The daughter of a state energy technician, Batakis has grown up with a front row seat of what big state intervention looks like. Batakis will inherit power over the Argentine economy at a time when members of her own party are at war with one another and there is an enormous task of reining in inflation ahead of 2023 presidential elections.
A lot in Argentine life revolves around inflation. And inflation and capital controls are the two things most tied to crypto adoption and the policy measures that support it or discourage it. The government is expected to post 70% inflation this year. It’s currently 60%. But inflation is also one of the main adoption drivers of Bitcoin, stablecoins and other crypto assets as a way to maneuver around the peso and find an alternative to scarce, physical US dollars inside the country.
It seems that Batakis will have too much on her plate to worry about regulating digital assets. She will likely focus the final chapter of Fernandez’ term on fiscal discipline, taming the country’s debt profile, and implementing a sector-specific set of currency controls for international trade. There is no doubt that these measures will stir the political pot and make little time for attending to fledgling financial innovations.
The fact that Batakis is unlikely to get much done in this political context means that Bitcoin and other crypto projects in Argentina will continue to prosper on the demand for alternative financial solutions. According to a May study by consultancy AMI, crypto penetration in Argentina was 12%, outpacing other main jurisdictions in the region. On the off chance that the new finance minister is successful in pulling down the rate of inflation, then Bitcoin and crypto might lose some ground - but not much.
What is more likely is that Argentines will continue to sniff out new ways to get on and get by with their daily financial lives and businesses. There are several examples where crypto is already doing this for them. Recently, Marcelo Cavazzoli’s Lemon Cash partnered with OpenNode to allow for Lightning Network transfers. Manuel Beaudroit’s Belo is a digital wallet that allows for holding Bitcoin, stablecoins and other crypto assets. Dario Sneidermanis’ MUUN wallet is a simple Bitcoin and Lightning Network project effective for low-cost transfers.
Even though Batakis is unlikely to interfere in these companies and projects from the regulatory side, Miguel Pesce at the Argentine Central Bank - a close ally of CFK - is likely to keep traditional banks and payment infrastructure from moving too fast into the space. Pesce is afraid that instead of a means of payment, crypto assets will be used for investor speculation and to avoid capital controls. He is hedging against that scenario. In May, when Banco Galicia tried to offer crypto buying and selling to customers, the Central Bank swiftly intervened. Sources in Argentine think that Batakis will come after crypto firms for tax revenues only. And if they pay, they stay.
All of this sends a message: in Argentina, the more macroeconomic dysfunction, the better for Bitcoin and crypto innovation. Except for if you are a traditional bank - then Pesce will come for you.
It will probably take someone without a crisis to manage to signal maturity to the Central Bank that the government in Buenos Aires can bridge traditional financial infrastructure with new crypto infrastructure. That seems like a long way off, because right now Batakis has too much of a mess on her hands.