In inflation-ridden Argentina, locals use ‘crypto caves’ – and avoid Bitcoin

Argentinians are reportedly turning away from Bitcoin (BTC) by using black market exchanges known locally as “crypto caves” to escape tight currency controls and the triple-digit devaluation of the Argentine peso (ARS). to perceived flexibility.

Crypto tunnels are underground peer-to-peer exchanges that operate in secret and are hidden in “inconspicuous spaces,” CryptoMarket strategic alliance manager Guillermo Escudero told Cointelegraph.

“It's not a normal commercial space that attracts public attention. They are hidden places where one can go to connect with pre-authentication and exchange their local fiat currency for cryptocurrencies, mostly USDT.

According to Escudero, if locals use such crypto tunnels, they can get a much better rate than the official currency. Local banks cannot officially accept dollars, so crypto wallets have become popular for storing dollar-pegged stablecoins like Tether (USDT).

Having the ability to save in ‘digital dollars' will allow Argentines to save their money in the long run as the local currency is depreciating,” said Ramiro Raposo, vice president of crypto payment firm BitWage, in a note to Cointelegraph.

I lived in Argentina from 14′-17′ and went to the ‘cave' every month to illegally buy my pesos for dollars, just to guarantee a flight home every year. Anyone who doesn't understand why crypto/defi is revolutionary is living under a rock. #bitcoin #ElSalvador pic.twitter.com/IxwjS8Tv5G

— Rich Kane (@richkane_) June 9, 2021

Crypto tunnels grew out of “financial tunnels” – which previously functioned as public currency exchanges but went underground when Argentina introduced currency controls in the 1980s.

It has led to the “blue dollar” – Argentina's informal and non-standard dollar rate – currently giving locals 1,115 ARS to $1.

Last December, the official rate hovered at 365 ARS to the dollar, but it rose to 829 ARS after economist Javier Millay became the country's new president in December.

Argentina's inflation in 2010 It will increase to a 32-year high of 211.4% in 2023, according to data from the country's statistics agency INDEC on Jan. 11.

Escudero said some crypto tunnels have been investigated and even raided by authorities. However, crypto tunnels do not give locals a “bad image” as they are one of the few places to trade the overvalued peso.

“[This is a result of] Having a government that arbitrarily blocks a currency exchange market that should be free like the rest of the world.

I bought some pesos in Argentina on a P2P exchange using USDT on Tron. Here is my experience

First, why go P2P? Because the official USD-ARS exchange rate is 2.5-3x worse than the “blue dollar”. I actually tried: I took out 30€ from the ATM, I paid 10€… pic.twitter.com/KC4uymdfyq

— Alexei Zamyatin (@alexeiZamyatin) November 13, 2023

However, Escudero stated that exchange controls will be “broadly expected” to be cleared under Mille's leadership, which could reduce the demand for crypto tunnels as they gain access to official channels.

“However, since the tax burden in Argentina is very high, we continue to have a ‘black market' that has the option to operate under the radar of comptroller bodies,” added Escudero.

Escudero crypto tunnels are also found in Cuba, Venezuela, Iran and several African countries.

Argentinians avoid Bitcoin payments

In December, Argentina moved to legalize Bitcoin as a form of payment for contracts — an election Milei promises to revitalize the country's economy.

CryptoMarket CEO María Fernanda Jupet told Cointelegraph that while the change represents progress, “it is not wise from a business perspective” to execute contracts in Bitcoin amid Argentina's high inflation.

“At some point, the transaction must be converted to Argentine pesos with inflation. [and] You agree to a contract using Bitcoin as a payment method, which may have daily price variations of more than 10% depending on Twitter.

Related: Argentina cuts crypto regularization in new economic reforms

“From a corporate perspective, this adds flexibility to flexibility,” Juppet added.

Escudero explained that Argentines prefer to use USDT on the Tron network because fewer conversions are involved.

“This is due to the speed of recognition, and at an accessible price, in addition to the fact that there is no difference, the similarity is 1:1, “This eliminates the need to change the scales when sending. “

Here in Argentina the most preferred payment method is USDT in Tron (if one sends), mainly due to tx costs. https://t.co/dnSxB2fBJ0

— BowTiedMara (@BowTiedMara) July 15, 2023

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