Buenos Aires, the crypto laboratory

In just a few years, the Argentinian capital has become a key player in the sector.

Hello everyone 👋

This is Raphaël live from Buenos Aires.

As you know, I've been in Argentina for a few days to discover the crypto ecosystem. And there's already a lot to tell you! But before we start, we'd already like to thank you because this report is only possible thanks to you. We'd also like to say hello to everyone who gave us contacts and helped with accommodation on site.

So crypto in Argentina? Revolution or not?

Of course, things are always more nuanced. In reality, the first thing that strikes you when you arrive in Buenos Aires is the Argentines' relationship with their currency, the peso. They hate it as much as they love Diego Maradona ⚽ ️. You feel it as soon as you arrive at the airport. When I took out my wallet in the first café, the two young waitresses who saw I had euros slipped me, "We'll take EU-ROS."

And pesos you take anyway? "Also", they explained, almost annoyed.

Speaking of pesos, one might imagine that the most convenient way to pick some up from abroad is to go to an ATM. There's no shortage of them at the airport. Big mistake! On top of the crazy fees, you'll be withdrawing pesos at the official rate. Yes, because in Argentina there's an official rate and an unofficial rate.

👉 The official rate is the one set by the central bank, on the instructions of the government. Currently, it is approximately 1 euro = 120 pesos.

👉 The unofficial rate is that used by Argentines in everyday life. Currently, it is 1 euro = 220 pesos.

This rather huge difference is simple to understand. For years, the government, regardless of political leanings, has sought to combat the peso's collapse and runaway inflation by locking in the peso's value at an artificial level. Except that Argentines know full well that the official exchange rate is overvalued. So they're desperate to get rid of their pesos and buy 'hard' currencies like the dollar or the euro to protect their savings, which only serves to depreciate the value of the peso... "It's often said that Argentina is the country with the most dollars after the United States", Mariano Mayer, former Argentine minister for SMEs and VSEs and co-founder of the Newtopia VC investment fund, slipped me.

On the "good" advice of Mariano and other locals, I therefore went to where all Argentines go: the cuevas, the "caves", found in the Florida district in the heart of Buenos Aires. Don't imagine that the cuevas are secret underground places (even IMF officials go there 🤫 ). They're just street vendors set up on the pavement. It was there that I found pesos at the 'right price'.

But why am I telling you all this? Because to understand today's Argentina, its social fractures, its economic difficulties and above all the success of crypto-currencies, you have to bear in mind this dual monetary system and the rather special relationship Argentinians have with the peso, which is nothing like that of the French or Germans with the euro.

When you pay in Paris or Munich, you don't think about the euro. But in a country like Argentina where the currency is losing value almost in real time - officially 70% inflation by 2021 (some say much more) - the price of money is a real obsession.

For decades, Argentines have been living with a peso they don't trust. 20 years ago, it was almost at parity with the dollar (1:1). Today it's worth 200 times less. 200 TIMES. "Here we pay in pesos, but we think in dollars or euros," the head of digital for the city of Buenos Aires, Diego Fernández, explained to me.

In this context, cryptocurrencies have only grown, and this is particularly striking in Buenos Aires. You certainly won't see bitcoin stickers on every street corner, but the phenomenon is real, as CrypStation shows. Based in the Puerto Madero district, this café, which takes payments in 30 other different cryptos, is just like the sector: flourishing. "We're getting more and more customers who pay in cryptos," explains owner Mauro Liberman. "Some also pay in pesos to get rid of them," he laughs.

The CrypStation café in Buenos Aires.

Beyond these very community-based (and somewhat anecdotal) businesses, Argentines are getting into cryptos for several reasons, but the first is obviously to protect themselves from inflation. Bitcoin is a star in this respect. But it is above all stablecoins, these cryptocurrencies indexed to a so-called "stable" asset, that are popular with individuals and also businesses, especially small ones that don't have access to the dollar, but also large groups.

The USDT and USDC, which we told you about a few weeks ago in our big report on stablecoins, are the most in demand in the country. As is the DAI, which is a decentralised stablecoin. The advantage of these cryptos is that they are backed by the dollar. "Stablecoins make it possible to have a stable currency and to transfer money easily, which is not necessarily easy to do with banks," says Mariano Di Pietrantonio, head of growth development at MakerDao, the organisation piloting the DAI.

The other lever for developing cryptocurrencies among Argentines is access to financial services. Because banks 🇦🇷 are expensive. Argentines are entitled to a bank account and a debit card, but all other services have to be paid for.

On average, Argentines pay 200 dollars a year for their bank, which is as much as in France, except that they don't have access to as many services and the average Argentine salary is three times lower than that of the French (10,000 dollars compared to 30,000 dollars). "Many Argentines are excluded from the banking system," explains Manuel Beaudroit, founder of Belo, an app that lets you buy and sell cryptocurrencies. And above all to spend them via a bank card thanks to a partnership with Mastercard.

In less than a year, the start-up, which has raised $3 million, already has more than 100,000 registered customers. What makes it so successful? Opening an account costs nothing. Customers can store their money (bitcoin, USDC, etc.) and pay free of charge with their card. Belo charges commission on cryptocurrency buying and selling transactions.

With Manuel Beaudroit at the Belo offices in Buenos Aires.

This start-up is far from being the only one: the local star is Ripio, an exchange platform that managed to raise $50 million last year and is planning to expand throughout Latin America. We'll be telling you all about it in The Big Whale very soon.

Aware of the problem, Argentina's banks are trying to catch the wave. Three weeks ago, the country's largest bank, Banco Galicia, announced that it would allow its customers to buy and sell cryptocurrencies. But that was without counting on the intervention of the International Monetary Fund (IMF). The institution, which has been supporting the country at arm's length for years, has put pressure on the government to get Argentine banks to abandon this kind of initiative. "The project has not been abandoned," a Banco Galicia spokesman slipped us a line, however.

Will this be enough to keep Argentine banks in the game? Nothing is less certain. "The banks are out of date. Their infrastructure is no longer adapted," explains Hanna Schiuma, vice-president of fintech Ank, a subsidiary of Brazilian bank Banco Itaú. In her view, "the future of banks is a mix between fintech customer relations and the architecture offered by cryptocurrencies". I'll be asking the Argentinian banks I'm due to see this week what they think.

Very good week to you all 🐳

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