Bye-bye Central Bank, Argentina Starts Using Bitcoin

JAKARTA - Argentina is taking bold steps by allowing the use of Bitcoin as a medium of exchange in financial contracts. Bitcoin contracts mean a form of legal agreement that allows parties involved in the contract to use Bitcoin as a means of payment. This was announced by Argentina's Foreign Minister, Diana Mondino, via her Twitter account.

"We confirm and confirm that in Argentina, contracts can be made in Bitcoin," Mondino wrote in Spanish, December 21.

This decision is part of the economic reform agenda carried by President Javier Milei, who was elected in November 2023. Milei is known as a supporter of cryptocurrencies. Mile's agenda is to remove the central bank. According to him, the central bank is a source of corruption and inflation.

He also promised to use the dollar to revive Argentina's economy, which is currently experiencing an inflation and debt crisis. Unfortunately, the dollarization plan met opposition from various parties, including Johns Hopkins University professor Steve Hanke, who is a monetary economist.

Hanke believes that the dollarization will worsen Argentina's condition, which requires exchange rate flexibility to adapt to global economic changes.

Since taking office on December 10, Milei has taken a number of controversial policies, such as lowering the value of Argentine pesos by more than 50% against the US dollar. At the end of 2023, the peso exchange rate reached 150 pesos per US dollar, or around IDR 2,307,000 (IDR 15,380 per US dollar).

Not only bitcoin

By allowing Bitcoin as a contract currency, the Argentine government seems to admit that pesos no longer have adequate purchasing power. Mondino even stated that Argentine citizens can use any exchange media agreed upon by the parties involved in the contract, including items such as steel or milk.

"This means that we are returning to the barter system, which is the most primitive and inefficient form of trading," said Martha Lamartha, a social media user who criticized Mondino's statement. She wrote sarcastically that she could help Mondino get dental treatment in exchange for oranges, bags, video tapes, and toys.

The Argentine government's move is also considered to be imitating the Central African Republic, which in 2022 announced that Bitcoin is the official means of payment in the country. However, this policy does little to help the economy of Central Africa, which is still one of the poorest countries in the world.

In addition to allowing Bitcoin as a contract currency, the Argentine government has also announced several other steps to address the economic crisis, such as removing fuel and transportation subsidies, reducing the number of ministries, and revising employment laws.