Argentina is one of the countries with the highest inflation rates in the world, reaching 50.5% in 2021. This has eroded the purchasing power of the Argentine peso and pushed many people to look for alternative ways to store their value and make transactions.
Argentina has the largest purchases and holdings of stablecoins in Latin America over the past six months, according to a report by Mexican-founded crypto exchange Bitso. Dealing with a severe economic crisis and a plunging peso, 60% of Argentine crypto purchases on Bitso were for dollar-based stablecoins USDT and USDC and just 13% of buys were for bitcoin.
One of the most popular options is to buy stablecoins, which are cryptocurrencies that are pegged to a fiat currency or a basket of assets. Stablecoins offer several advantages over traditional currencies in Argentina. They are easy to access, as anyone with a smartphone and an internet connection can buy them through various platforms.
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They are also cheaper to use, as they avoid the high fees and taxes that are imposed on foreign exchange transactions. Moreover, they are more stable, as they are not affected by the volatility of the local currency or the government’s monetary policies.
Among the different types of stablecoins available, two of them stand out as the most preferred by Argentine users: Tether (USDT) and Circle (USDC). These are both pegged to the US dollar, which is the most widely used reserve currency in the world.
According to a report by Chainalysis, a blockchain analytics firm, Tether and Circle accounted for 79% and 15% of all stablecoin purchases in Argentina in 2023, respectively.
The dominance of these two stablecoins can be explained by several factors. First, they have a high level of liquidity and acceptance, as they are supported by many exchanges, wallets, and payment services.
Second, they have a high level of trust and transparency, as they are backed by audited reserves and comply with regulatory standards. Third, they have a high level of innovation and integration, as they offer various features and solutions for different use cases.
For example, Tether has recently launched Tether Gold (XAUT), a stablecoin that is backed by physical gold stored in a vault. This allows users to gain exposure to the precious metal without having to deal with its storage and security issues. Tether also supports various blockchain networks, such as Ethereum, Tron, Solana, and Algorand, which enable faster and cheaper transactions.
Similarly, Circle has recently partnered with Visa, Mastercard, and PayPal, to enable seamless payments and transfers between fiat and crypto. Circle also supports various DeFi protocols, such as Compound, Aave, and Maker DAO, which allow users to earn interest and borrow funds using their stablecoins. Circle also plans to launch a new stablecoin that will be pegged to the Argentine peso, which could increase its adoption among local users.
Tether and Circle stablecoins are dominating the market in Argentina due to their superior features and benefits. They provide a reliable and convenient alternative to the traditional financial system, which is plagued by inflation and inefficiency. They also open up new opportunities and possibilities for users who want to access the global economy and the emerging crypto ecosystem.