Argentina’s Default: A Bitcoin Opportunity?

Argentina currency

NEW YORK (InsideBitcoins) — Argentina, a country that won its independence from Spain after the May revolution of 1810, is under siege again and this time the invading force is not the Spanish empire — it’s the bill collector.

International investors anxiously await the outcome of the illustrious nation’s latest debacle while also watching closely for opportunities to profit. Argentina, the second largest economy in South America and the 27th in the world according to the IMF, defaulted on its obligations last week by failing to make a $539 million interest payment to bond holders.

This $100 billion liability has now triggered complicated discussions involving insurance claims, credit default swaps, and derivatives.

Enter Bitcoin.

Due to rigid currency controls inside Argentina, such as restrictions on taking the local currency (peso) out of the country — as well as very high exchange fees for currency brought into the nation — many have looked to Bitcoin for relief.

In fact, the rumor mills are chock-full of stories that Argentina could be the first nation to go completely digital.

The New Yorker recently noted the possibility, highlighting Sergio Ruestes, an Argentina film maker, who documented the business community’s enthusiasm for Bitcoin as an alternative to the perennially suffering peso. And The Economist has reported that Argentina is home to more bitcoin-accepting merchants than any other South American country.

It’s been only 13 years since Argentina’s last default in 2001. With eight in its 200-year history, its default rate is approximately 6.5%, staggering. It is this unreliability that is the driving force for an alternative means of monetary preservation and exchange.

In Buenos Aires, investors are reacting to a recent ruling by U.S. District Judge Thomas P. Griesa who declined Argentina’s request to remove the mediator in the case between the nation and the bondholders, Daniel Pollack. It was the mediator Pollack that articulated Argentina’s default was imminent after a breakdown in negotiations between interested parties on July 30.

Therefore many are blaming the so called “special master” on this case — as if the messenger is responsible for the bad news.

Meanwhile, Bitcoin supporters point to decades of poor economic policies in Argentina and a fundamental flaw in the concept of paper currency as the real culprit. But in Argentina, all things financial seem more complicated than necessary.

For example, Unisend, the largest bitcoin exchange in Argentina, reported via its blog on August 4 that it had “stopped accepting deposits and bank transfers” to/from SantanderRio Bank and Banco Galicia, two of the top five banks in the nation. In reality, the banks had closed the company’s accounts, without explanation.

“We see this as discriminatory and arbitrary, since we comply with all requirements and regulations,” Unisend said. The company claims it is a temporary problem and that a long term solution is in the works. Investors are watching closely to see what happens next for Unisend, as currently its ability to do business in Argentina has been completely halted.

While Argentina denies that a default has even occurred – blaming the U.S. of “playing dumb,” financial centers around the world watch — and Bitcoin believers wait.

Written by Darnell Jackson

Photo credit: Speaking Latino via photopin cc

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