Stablecoin Use Booms in Argentina as Inflation Soars: Report

Cryptocurrency adoption is increasing in Argentina, with a link between the use of stablecoins and the devaluation of the national currency, according to a new report.

Research released on Wednesday by blockchain data firm Chainalysis showed that Argentina's stablecoin usage is among the highest in the region, with the South American country's share of stablecoin transaction volume at 61.8% of all crypto transactions – higher than Brazil's 59.8% . Only Colombia landed higher at 66%.

According to Chainalysis, the reason for the rapid use of such assets in Argentina is that people in the country – which has one of the highest inflation rates in the world – are using stablecoins to gain exposure to US dollars.

“(Argentinians’) interest in stablecoins highlights the role of cryptocurrencies in unstable markets and shows how citizens can better control their financial future by using cryptocurrencies, regardless of official monetary policy,” the report said.

It added that the falling value of the Argentine peso regularly leads to an increase in stablecoin trading on crypto exchanges.

Stablecoins are cryptocurrencies with a relatively fixed price that are typically pegged to a fiat currency – often the US dollar. They typically work with a private company that issues digital tokens on a number of major blockchains and then holds greenbacks in reserves to back them.

They are also the backbone of the crypto economy: the 24-hour trading volume of the two largest stablecoins –Connection And USD coin– is much higher than Bitcoin's, CoinGecko data shows. This is because the digital tokens allow trades to be entered and exited seamlessly without the need for access to a traditional bank.

Argentina's economy is a mess: Argentina's inflation rate was 236.7% in the 12 months through August, data from the country's central bank and over half the population show lives in poverty. While there are signs that inflation is cooling, the impact of last year is still reeling from the economy.

Argentina last year chosen Libertarian economist Javier Milei elected president. The fiery populist promised to regulate the country's finances and previously spoke about his interest in Bitcoin.

Chainalysis' report also noted that in Venezuela, another country suffering from hyperinflation, citizens are also using cryptocurrencies to hedge against the country's economic crisis. The country has received the largest amount of cryptocurrency or purchased it through a centralized exchange of any other country in the region, the report said.

Edited by Andrew Hayward