In inflation-torn Argentina, locals use ‘crypto caves’ — and avoid Bitcoin

Source: Cointelegraph

Argentines are using black market exchanges, known locally as “crypto caves,” to buy United States dollar stablecoins in a bid to escape strict currency controls and the triple-digit inflation of the Argentine peso. Argentines are also reportedly shunning Bitcoin BTC $48,885 due to perceived volatility.

Crypto caves are underground peer-to-peer exchanges operating secretly and tucked away in “non-visible places,” CryptoMarket’s strategic alliances manager Guillermo Escudero told Cointelegraph.

“It is not a normal commercial place with public attention. They are hidden places where one goes with prior confirmation to meet and can change their local fiat money against cryptocurrencies, mostly USDT.”

Escudero said that locals can get a far better rate than the official exchange rate if they use crypto caves. Local banks cannot officially accept U.S. dollars, so crypto wallets have become popular to store dollar-pegged stablecoins like Tether USDT $1.00.

“Having the ability to save in “digital dollars” allows Argentinians to save money in the long run as the local currency loses value,” Ramiero Raposo, vice president at crypto payroll firm Bitwage, said in a note to Cointelegraph.

Crypto caves emerged from “financial caves” — entities that previously operated as public money exchanges but went into hiding when Argentina brought in currency controls in the 1980s.

It led to the “blue dollar” — Argentina’s unofficial and informal dollar rate — which currently offers locals 1,115 pesos for $1.

In December 2023, the official rate hovered around 365 pesos to the dollar but has increased to 829 pesos since economist Javier Milei became the country’s new president.

Argentina’s inflation rate hit a 32-year high of 211.4% in 2023, according to the latest Jan. 11 figures from the country’s statistics agency, the National Institute of Statistics and Censuses.

Escudero said some crypto caves have been investigated and even raided by authorities. However, the crypto caves don’t give off a “bad image” to locals, as they’re one of the few places they can trade away their inflation-ridden pesos.

“[This is a result of] having a government that arbitrarily prohibits access to a money exchange market that should be free as it is in the rest of the world.”

However, Escudero explained that currency controls are “widely expected” to be wiped under Milei’s leadership, which could drive down demand for crypto caves as access to official channels becomes available.

“But since the tax pressure is so high in Argentina, we will continue to have a ‘black market’ that has a preference to operate under the radar of the comptroller entities,” Escudero added.

Escudero said crypto caves also exist in Cuba, Venezuela, Iran and several African countries.

Argentines avoid Bitcoin payments

In December 2023, Argentina moved to legalize Bitcoin as a payment method for contracts — part of Milei’s election promise to revamp the country’s economy.

CryptoMarket CEO María Fernanda Juppet told Cointelegraph that while the change signals progress, “it’s not wise from a business perspective” to carry out contracts in Bitcoin amid Argentina’s high-inflation environment.

“At some point, the transaction will have to convert into Argentine pesos, with its inflation issues [and] you agree to a contract using Bitcoin as a payment method that can have daily price variations over 10% based on a tweet.”

“From a corporation’s point of view, that is adding volatility over volatility,” Juppet added.

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

“This is due to its speed of accreditation, and at its accessible cost, in addition to the fact that it has no variation being its parity 1:1, he said. “This avoids the need to make conversions at the time of sending balances.”