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Argentina is considering paying salaries in cryptocurrencies

Photo of: Joseph Stone
by Joseph Stone

Could salaries in Argentina be paid in crypto? This is what a deputy of the lower house of the Argentine National Congress wants. José Luis Ramón, representative of the Protectora Fuerza Política party has filed a bill in this sense. It would allow Argentine workers and exporters to receive all or part of their wages in cryptocurrency.

This decision has caused a reaction around the world, in a context where South America seems to turn to alternatives to the dollar and national currencies. Indeed, like Venezuela, Brazil, and Uruguay, Argentina is experiencing significant annual inflation.

Could crypto be used as a defense against inflation? It’s an idea that is making its way. After El Salvador, which has adopted Bitcoin as legal currency, Panama had announced to be looking into the matter. And this week, Argentina is leading the way by proposing payments of salaries and exports in digital currencies, and not only in bitcoin.

Inflation in South America is a growing problem. Venezuela has been hit particularly hard, with an inflation rate of 3,000% in 2021. Argentina is not yet at that stage. There, the rate remains around 50%. However, the situation is already problematic. To combat currency inflows, Law 27,541 was passed in December 2019. This allows foreign currencies to be taxed at 30%. However, as José Luis Ramón points out, Bitcoin or another cryptocurrency would not be affected by this tax.

In addition, to control the price of the Argentine peso, currency exchanges are subject to strict controls by the central bank. Argentines and businesses are forced to go through official exchange offices. This adds a lot of friction to the exchange. In addition, the latter often charge exchange rates that are far from the market price. These points strongly affect the country’s economic and foreign trade activity.

The use of a cryptocurrency would therefore be twofold. It would allow both not to crush fiscally the citizens and the businesses and to fluidify the exchanges. Moreover, the use of cryptocurrency would not have the same impact as the dollar on the sovereignty of the country.

This law still needs to be validated by the lower house of deputies. As well as the Senate before being finally presented to President Alberto Fernández. The latter will then have the opportunity to approve it. The number of deputies in Argentina is important, and nothing is done yet. However, this proposal is part of a legal movement for bitcoin and cryptocurrency that is affecting the entire American continent. South and Central American countries are obviously very supportive of this new means of payment. The latter are battling between inflation problems and the US dollar trap. This is a geographical area where the adoption of cryptocurrency is significantly high.

But North America also seems to be turning to digital currencies. As time goes on, Canada and the US are developing more and more infrastructure for mining. The legal framework to allow the purchase and possession of crypto-assets in these countries have evolved significantly.