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Argentina is Launching a State-Backed Stablecoin in the Era of CBDC

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Tushar Verma
Argentina is Launching a State-Backed Stablecoin in the Era of CBDC

When it comes to adapting blockchain innovation, South American countries are moving ahead of the rest of the world, partly because they want to gain the first mover advantage and majorly because they do not have the financial stability that cryptocurrencies can provide. Along the same lines, Argentina’s San Luis province has come up with Financial Innovation for Investment and Social Economic Development Bill that proposes the development of a stablecoin that is pegged one-to-one with the US dollar.

The news has made global headlines as Argentina’s astounding inflation rate of 64% is not expected to be controlled anytime soon. The inclusion of stablecoin in highly unstable economies can act as a hedge against the inflation of the local currency. The decreasing value of the Argentine Peso is one of the main reasons that citizens are already using stablecoins as a mode of retail payments. Having a state-backed stablecoin would add to the trust in cryptocurrencies and facilitate the development of a mechanism that normalizes the usage of crypto payments. Last year, the price of the Argentine Peso increased by 69.72 percent against the US dollar and that tells a lot about why Argentina is moving forwards with a USD-backed stablecoin rather than a CBDC. India has already launched its wholesale as well as retail CBDCs because Indian Rupee inflated only by 8.41 percent against the USD last year which is 8.2 times lower than that of the Argentine Peso. 

The reasons are clear, Argentina is not being able to stabilize its economy, and residents as well as provinces are looking towards the USD-pegged stablecoins as a hedge against the uncontrolled inflation in the country. According to the bill, all residents above the age of 18 will be authorized to use “Activo Digital San Luis de Ahorro” which will be pegged with the USD via 100% collateralized by the liquid assets of the state. The state of San Luis is allowed to use 2% of the state budget to issue stablecoins. ..Read More

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Tushar Verma
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