EspañolRecently, the Central Bank of Argentina (BCRA) released a “Statement to General Public” (available on the Central Bank’s website) about the proliferation in use of virtual currencies, bitcoin being the most prominent. The purpose of this brief statement was to “alert the general public about the risks involved” in using virtual currencies, in contrast to currencies backed by national governments, such as the Argentinean peso.
“So-called ‘virtual currencies’ are not emitted by this Central Bank nor by other international monetary authority, therefore, they are not legal tender nor do they possess any form of backing,” reads the first sentence of the statement, suggesting other currencies in circulation emitted by qualified authorities do have some sort of backing.
Without having to do a run through a history of the post-World War II era, the shift toward the US dollar as the reserve currency of the world, and the consequences of the Bretton Woods system, we can flash forward to more recent history and ask the BCRA: what exactly backs the Argentinean peso?
Clearly, there are many different opinions on the matter in Argentina. For example, in 2012, after the reform of the BCRA’s statute, the pro-government newspaper Página/12 published an article in which two economists guaranteed that the reform of the aforementioned statute “eliminated an eccentricity that Argentina had inherited during the era of the convertibility system: the backing of pesos with foreign currency.” The article continued by explaining that “the value of a 100 peso bill is not defined by the number of dollars the Central Bank is able to accumulate, but by the number of goods it is able to buy.”
To sum up, there are obviously ideas spinning around in the minds of the Kirchneristas that make it feasible to think that the absence of reserves has nothing to do with the devaluation and instability of the peso. But let’s back to the BCRA’s statement and their fears regarding virtual currencies.
“Internationally, however, there is still no consensus on the nature of those assets, several regulatory authorities have warned about their eventual use in money-laundering operations and various forms of fraud.” In other words, just like all currencies printed by central banks.
“In addition, there are no governmental mechanisms that guarantee their official value. The so-called virtual currencies have demonstrated a great amount of volatility so far, experiencing rapid and substantial variations in prices.” This is the statement from a government that has dedicated itself to the modification of price indices to hide the true rate of inflation. The figures from the National Institute of Census and Statistics (INDEC) do not even match the price index calculated by the National Congress. We can’t even calculate the peso’s volatility. It’s also worth remembering that former Secretary of Interior Commerce Guillermo Moreno fined the consultants who released this data.
In conclusion, the BCRA declares the risks associated with the use of virtual currencies to be exclusive to its users, but then adds that it is currently “analyzing several scenarios to verity that operations with these assets do not present a risk to BCRA’s tasks and its oversight expressly established in its organic charter.”
What this means is that, sooner or later, bureaucratic busybodies and state functionaries at the service of the legitimate state monopoly and centralization of authority, will look to interfere in what can surely be considered one of the biggest advances in financial freedom of our time. It remains to be seen if they have ability to regulate crypto-anarchy.
Editor’s note: Argentina has one of the most passionate bitcoin communities in the world. In this respect, we recommend you read this post by James Downer.