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Resignation of economy minister raised Premiums on Argentina's USD stablecoins.

05-Jul-2022 By: Rohit Tripathi
Resignation of econo

Resignation of economy minister raised Premiums on Argentina's USD stablecoins.

Argentina has been fighting a protracted battle against growing inflation and the peso's ongoing depreciation versus the US dollar.

The surprise departure of Martin Guzman, Argentina's Economy Minister, caused the price of stablecoins tethered to the US dollar to rise across exchanges on Saturday. Argentina has one of the highest rates of crypto adoption in the world.

A faltering economy already dealing with high inflation and a weakening national currency now faces further instability as a result of the minister's shocking resignation, which was announced on Sunday via a seven-page statement posted on his Twitter account.

Data from reports indicates that the price to purchase Tether (USDT) with Argentine pesos (ARS) at the moment is 271.4 ARS through the Binance exchange, which is about a 12 percent premium from before the resignation announcement and a 116.25 percent premium compared to the current fiat exchange rate of USD/ARS.

A local cryptocurrency price tracking website claims that similar rises have been seen in other USD-pegged stablecoins like Dai (DAI), Binance USD (BUSD), Pax Dollar (USDP), and Dollar on Chain (DOC).

Argentineans are investing heavily in cryptocurrencies as a way to protect themselves against rising inflation in their nation and further depreciation of the peso relative to the US dollar.

In 2016, before inflation had a significant impact, one USD could only buy about 14.72 Argentine pesos. Six years later, though, one USD can purchase up to 125.5 ARS.

Decree No. 609/2019, a law enacted on September 1, 2019, has made it nearly impossible for Argentinians to convert more than $200 in dollars per month at the official exchange rate due to the additional premium on U.S.-dollar pegged stablecoins.

It was put into place to prevent the Argentine peso from falling sharply in the face of a failing economy. Trading Economics reports that in May, Argentina's annual inflation rate rose for the fourth month in a row to reach 60.7 percent.

Argentineans are expected to use or own cryptocurrency at a rate of about 21% by 2021, according to Statista, giving the South American country the sixth-highest adoption rate internationally.

According to a CoinGabbar analysis from May, Argentina's "crypto penetration" has increased to 12 percent, which is twice the rate of Peru, Mexico, and other nations in the region. This growth was mostly caused by residents looking for a haven from growing prices.

In addition to Bitcoin, Argentineans are increasingly using stablecoins as a way to store value in the US dollar.

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