The government of Argentina has announced that they are cracking down on cryptocurrency trading in order to curb money laundering and illegal activity. However, it is quite obvious that the real reason for Argentina’s crypto crackdown is the hyperinflation of the Argentinian Peso (ARS).
The Argentinian Peso (ARS) was already experiencing over 50% inflation in 2019, and that was before the Coronavirus crushed the global economy. Now the government of Argentina is defaulting on their national debt, which will undoubtedly fuel the flames of a hyperinflationary crisis.
A fraction of Argentinians have been buying cryptocurrency in order to protect their funds from fiat hyperinflation, as shown by a surge in Argentinian Peso (ARS) volume on Localbitcoins. Further, crypto can be used as a bridge to convert Argentinian Pesos (ARS) into more stable fiat currencies like the USD and EUR.
The government of Argentina fears that the conversion of Argentinian Pesos (ARS) into crypto and other fiat currencies, which is known as capital outflow, will accelerate the collapse of the Argentinian Peso (ARS). This is the real reason that the government of Argentina is trying to stomp out crypto trading.
Although it should be the right of Argentinians to do everything it takes to protect their money from inflation, the government prefers to force its citizens to keep using a rapidly devaluating national fiat currency, just to buy the government a little more money and time.
Notably, this same scenario has already played out in other countries where hyperinflation has spiraled out of control such as Iran and Zimbabwe. The government’s narrative is always that crypto needs to be banned in order to stop crime, but the reality in these cases is that governments are just trying to ban crypto in as part of a last ditch attempt to slow hyperinflation.