Amid a weakening peso and upcoming midterm elections, Argentines are increasingly using stablecoins and arbitrage strategies to protect their savings. This surge in crypto activity follows tighter capital controls imposed by the central bank. President Javier Milei's administration has reduced inflation but faces concerns over potential further devaluation.
The Argentine peso has declined by over 4% against the U.S. dollar since the start of October, according to Google Finance data. This devaluation, coupled with economic restrictions ahead of the October 26 midterm elections, has driven locals to cryptocurrencies, particularly stablecoins, as a hedge against currency instability.
To counter the peso's fall, Argentines are employing a strategy known as “rulo,” which involves converting dollars into stablecoins and reselling them for pesos on the parallel exchange market. There, the currency trades nearly 7% lower than the official rate, offering returns of up to 4% per transaction, per a Bloomberg report citing locals. This approach has gained traction after Argentina’s central bank barred individuals from reselling dollars for 90 days starting October 1.
Local trading platforms have seen significant increases in activity. Ripio reported a 40% surge in stablecoin-to-peso transactions just a week after the restriction. Similarly, Lemon Cash noted crypto transactions jumping over 50% above average levels.
Julián Colombo, Argentina country manager at crypto exchange Bitso, explained that stablecoins serve as a “vehicle to get cheaper dollars.” He added, “Crypto is still in the process of being regulated, so the government doesn’t yet know how to control it or restrict liquidity in stablecoins, which has allowed this rulo to flourish.”
President Javier Milei, who took office in late 2023, has lowered inflation from nearly 300% to around 30% and recently signed a $20 billion currency swap deal with the U.S. However, the central bank has sold substantial dollars to defend the peso, including an estimated $1.3 billion over a week in early October. Locals fear that poor performance by Milei’s bloc in the elections could force further devaluation to bolster dwindling reserves.
Nicole Connor, leader of Argentina’s Women in Crypto organization, said, “Inflation and political uncertainty make us more conservative, so I don’t have any savings or investments in pesos, I only use them for expenses.” Argentina has adopted a pro-crypto stance, granting licenses to platforms like Coinbase and Binance, and allowing U.S. crypto products into the market. Market participants anticipate continued growth in stablecoin usage amid ongoing economic pressures.