The future of Bitcoin in Argentina

Can Bitcoin Conquer Argentina?

Mainstream media outlets (such as the New York Times and the Economist) are increasingly reporting on issues surrounding Bitcoin, and it’s easy to understand why.

Some data and rumors suggest that if Bitcoin is becoming a popular currency anywhere in the world, it should be in Argentina.

According to the Bitcoin Market Potential Index (BMPI), there are already 177 countries using Bitcoin technology. Argentina will also be among these countries to accept digital currencies.

Argentina has economic problems, with an annual inflation rate of 35%. In theory, this means that Argentina's monetary system is extremely fragile, which has led to the emergence of many black markets that use alternative means of trading.

Small but enthusiastic user base

Bitcoin is not controversial in Argentina, with respondents telling CoinDesk that the country’s acceptance of the currency is comparable to that of New York or San Francisco.

For example, tech entrepreneur Joan Cwaik estimates that Argentina has 8,000 to 200,000 users, with daily bitcoin transactions exceeding $70,000 to $80,000. Wences Casares, founder of bitcoin security firm XAPO, recently told CoinDesk that they offer a viable digital currency solution for Argentina.

But the problem is that Bitcoin has not yet fully covered Argentina, and the question is "How can Bitcoin conquer Argentina?" Considering the need to expand the user base, Argentine entrepreneurs are in great need of some technology to develop their businesses so that their businesses are not limited to niche users. For example, entrepreneur Sebastian Serrano admitted that he once ran a Bitcoin processing company BitPagos that earned Bitcoin through several hackers.

Serrano told CoinDesk:

“In South America, there are a lot of entrepreneurs, but not a lot of startups. There are some opportunities here, not just for Bitcoin.”

As Serrano tells it, the New York Times uncovered evidence of this claim in Argentina, where Dante Castiglione was a Bitcoin agent shuttling between offices, exchanging pesos for Bitcoins, and what appeared to be a thriving small business.

Serrano continued:

"Lang Shining is like a small Coinbase or agent. He basically goes to many places to do transactions himself, and those places are also very typical... If the country is out of control, then big companies will do it."

Funding crunch

BitPagos isn’t the only bitcoin startup in Argentina.

Other notable startups include Bitex.la, SatoshiTango and Unisend, but the latest batch of lists shows that Argentine bitcoin companies account for only one-fifth of the more than 20 bitcoin companies funded by San Francisco-based business incubator Boost VC.

Although there are many companies that accept Bitcoin in New York, local investors have not shown interest in these companies.

Carlos Jorge Gubelman, who directs a research project on the economics of cryptocurrencies at the University of Business in Argentina, described many of the problems of starting a business in Argentina, and also explained that the funding gap for Bitcoin companies is very large.

He told CoinDesk:

“I think the fundamental problem for Bitcoin companies is the lack of capital. Argentina’s capital market is very small, which limits large companies and banks from lending to startups through the central bank.”

Gubelman believes that local businesses' distrust of banks and financial institutions may extend to venture capital firms, so business owners are reluctant to invest their money in these institutions.

“There are some…angel investors, there are some online funding platforms, but these are not well known or used, and the financial institutions in Argentina are also preventing startups from thriving. People are using Bitcoin as an option to get out of control, rather than wanting to make the most of the technology.”

He based his opinion on a practical legal handbook on venture capital law in Argentina, which was published in 2012 and states: "Angel investors provide seed money and are usually relatives or acquaintances of the entrepreneur."

Entrepreneur Kawalk said the process of raising funds is very long, and local corporate bankruptcy laws and employee rights laws can help solve the problem of lack of funds for enterprises.

That’s not to say that Argentinian bitcoin startups won’t benefit from these massive funding rounds. Xapo is perhaps the country’s most high-profile bitcoin company, having received $40 million in funding from two venture capital firms. However, while their team is from Argentina, their operations are based in the United States.

CoinDesk’s venture capital records show that most of Xapo’s funding came from outside Argentina.

Entrepreneurial Culture

However, lack of start-up funding has not hampered the country’s entrepreneurial spirit.

“Chile has the conditions, Brazil has the market and Argentina has the entrepreneurs,” said Juan Martín Rodríguez, executive director of the Naves Entrepreneurship Program at IAE University.

Argentina's problem is that the country is politically unstable.

“There are a lot of potential startups, a lot of entrepreneurial ideas, a lot of opportunities and a lot of entrepreneurial talent, actually some very well-known people in the region, but the political environment here makes it difficult to start a business.”

Yet Rodriguez seemed to relish the changing political landscape when he talked about how the government would change.

Gubelman also stressed the role that Argentine business schools play in future entrepreneurs.

Still, he said, there are few and far between like Xapo CEO Vince Casares, an Argentine entrepreneur himself.

It is safe to say that Argentina could benefit from a viable alternative to fiat currency that would allow people to avoid crippling inflation rates. Whether Bitcoin will be the solution remains to be seen.

While digital currency acceptance is growing, the question is whether crypto startups can survive in the country. There is evidence that Argentina is a hotbed where ideas can flourish as long as funding is available from somewhere.

There may be some hope in the upcoming elections, which are due in October, which will bring opportunities for startups in Argentina to grow and rise.

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