Micheal Saylor, the founder of Microstrategy, has told residents of inflation-stricken Argentina that they now “need Bitcoin.” While many bitcoins have welcomed Saylor’s suggestion, some critics have claimed that the top crypto-asset’s volatility makes it an unsuitable alternative to the faltering local currency.
While the Argentine currency -the peso- continued with the fall that has led it to depreciate more than 40% in the last twelve months, Micheal Saylor, founder of Microstrategy, has intervened tweeting that the people who live in the South American country now “ need bitcoin.” In a subsequent tweet, Saylor, a bitcoin critic-turned-advocate, also shared news about the South American country’s inflation rate after it topped 7.58% daily.
The tweets from Saylor, whose company is one of the largest corporate holders of BTC, came as reports suggested that some Argentine politicians favor substituting the peso for the US dollar. As Bitcoin.com News reported, Argentine presidential hopeful Javier Milei has said that dollarization can curb inflation, which officially stood at 103.4% in March.
Milei, who is emerging as a favorite in the presidential elections scheduled for October 22, said he plans to close the central bank before starting the dollarization process. Steve Hanke, professor of applied economics at Johns Hopkins University, has also suggested that the South American country can only get out of its current situation by becoming a dollar.
However, despite the apparent widespread support for dollarization in Argentina, critics of the US dollar, including Saylor’s followers on Twitter, have expressed support for his call for residents to choose Bitcoin instead.
Argentina’s fiscal imbalances will not disappear after dollarization
However, some of Saylor’s followers on Twitter such as Manu Ferrari B, a self-proclaimed “freedom maximalist”, have said that BTC is too volatile and therefore cannot be a viable alternative to the falling peso at the moment. . The user suggested that while a Bitcoin-backed stablecoin may become the solution, much remains to be done. He added:
”But all the technology is not ready yet. Most bitcoiners who don’t live in Argentina, Lebanon, Venezuela won’t understand this. Most of the bitcoiners who talk about Argentina don’t know what they are talking about. Fully centralized stablecoins running on fiat legacy rails are also not a solution.”
In addition to being an expensive undertaking, the dollarization of the Argentine economy would result in the country’s central bank becoming subservient to the policies of the US Federal Reserve. With dollarization, the central bank would also lose seigniorage, that is, the benefits obtained from printing money.
A political report published by the Policy Center for the New South on April 28, 2022 described calls to dollarize the economy as the “rebirth of a zombie idea.” Denouncing the proposal of the Argentine Congress to maintain the greenback as the country’s main currency, the letter warned that the “fiscal imbalances of the country will not be eliminated by dollarization.” The brief also said that dollarization would also require “a selective default of domestic currency liabilities, a brutal devaluation, and/or a unilateral conversion of public deposits.”
