The COVID-19 pandemic continues to wreak havoc across global economies. But even before the crisis, the South American nations of Argentina and Venezuela were embroiled in financial turmoil. Now both countries are turning to blockchain technology and cryptocurrency in an effort to combat the financial fallout that is only deepening as COVID-19 sweeps across the region.
We start off with reports that Argentinean citizens are rapidly dumping their fiat pesos for Bitcoin as the possibility of the country defaulting on a $65 billion foreign debt looms ahead. In a two-part Twitter update posted on April 23, Arcane Research published its findings showing that the volume of BTC purchased with Argentine pesos has reached a massive 1028% since the start of 2018.
Blockchain-Based Solution can Ease the Burden
This is not the first time that Argentineans have sought to exchange their rapidly weakening fiat currency for a much stronger alternative. Back in October 2019, the Central Bank of the Argentine Republic was even forced to impose capital controls for all USD purchases on all residents to protect the Argentine peso from further decline.
Now amid reports that the country recently missed a $503 million debt repayment and rising inflation, innovators have been looking to utilize Blockchain technology and cryptocurrencies to keep the economy afloat as the country and the rest of the world continue to battle the COVID-19 pandemic and its resulting financial crisis.
Argentina’s Central Bank is now promoting a proof of concept decentralized system solution based on Blockchain technology for end-to-end traceability of account debit claims. This system is now being tested to determine how it can solve process integration problems between banks with a view to defining and exploiting other potential network uses.
Bitcoin-Backed Synthetic USD Set to Tackle Inflation in Venezuela
Last year, the company had launched a cross-border payments service for residents of Colombia to send money directly to Venezuelan bank accounts. The cryptodollar would offer a viable solution to cross-border payments outside of the risky black market and the increasingly capital controlled Western Union and MoneyGram services. By pegging payments to the value of the cryptodollar, recipients can receive better value for their transfers. The process takes only a few minutes, unlike with other services that took days. The news has been well received by the Twitter community.
Venezuela is no stranger to crypto payments and its citizens even use Bitcoin for donations to charity organizations, in addition to payments and remittances.