Argentina has long been looked to by bitcoin enthusiasts as a fertile area for consumer adoption due to the unstable nature of the country's native currency, the Argentine peso.
Still, while a growing number of Argentines are using bitcoin as an alternative store of value in a time of economic turbulence, the country has yet to see many merchants capitalize on digital currency's rising popularity in the region.
BitPagos, the country's leading bitcoin merchant processor, for example, reports it has enrolled just 600 merchants to date. By comparison, major US processors such as BitPay and Coinbase have each signed up more than 30,000 small and large businesses.
However, the narrative surrounding merchant bitcoin adoption in Latin America may be primed for change. One of the larger merchants now serving local bitcoin users is Avalancha, the newly launched online electronics and home goods store that on 7th August announced a partnership with local bitcoin payment processor BitPagos and Latin America-focused bitcoin exchange Bitex.la.
Speaking to CoinDesk, BitPagos CEO Sebastian Serrano indicated that he is optimistic that Avalancha will become the major merchant that inspires other online retailers to begin seriously considering both bitcoin and his company's service.
"I think it's going to be a catalyst that is going to help us increase adoption even more. It has been covered in major newspapers and it's going to be similar to Overstock in the effect internally for the online companies."
Avalancha aims to generate 25m pesos in revenue by the year's end, or roughly $3m.
Argentina's Overstock moment
The comparison to Overstock, considered by many to be the first major retailer to enter the bitcoin ecosystem in January of this year, is a lofty one. Not only has the US-based company accepted bitcoin, but it has also become a visible leader in the space, exploring the ecosystem's more experimental technologies and appearing at major bitcoin conferences.
Still, the comparison could hold merit due to the fact that overall bitcoin awareness in Argentina is low among merchants. Miguel Klurfan, CEO of Avalancha, told CoinDesk:
"I think the average merchant is not fully aware of bitcoin. They probably heard about bitcoin but they certainly don’t have a clue of how it works and the benefits it might have for their business."
Despite its relative newcomer status – Avalancha launched in May – Serrano believes the retailer has the right connections to become a major player in Argentina's e-commerce market.
"Argentina has very high restrictions for importing, so it's very difficult to import anything. One way to import [products] is to assemble that product in the country. Newsan assembles Samsung products, laundry machines and more."
Building the ecosystem
Klurfan told CoinDesk that Overstock was an influence on his company's decision to accept bitcoin, though he acknowledged that Dell’s association with the digital currency was also a factor.
The CEO said that Avalancha has been watching Overstock's announcements and monitoring its bitcoin sales updates. He, too, is optimistic about how his company could provide a similar success story to the Latin American bitcoin ecosystem, saying:
"[Bitcoin] will need some new players to get involved in the system for it to be able to work as a means of exchange, and that's the part that, at Avalancha, we can help. We can help to make bitcoin good for exchanging products and not only for storing value."
Still, Klurfan suggested that he doesn't expect to see the sales success that Overstock and other large merchants have enjoyed in the US, adding:
"For us, accepting bitcoin is a way to express our belief in the currency and its potential as a sales generator in the mid-term. But, we don’t expect huge sales coming from bitcoin in the near future."
Weighing the risks
Despite warnings from Argentina's central bank regarding bitcoin payments, Klurfan said that he and his company see a bright future for bitcoin and its related technologies.
Klurfan told CoinDesk that one of the central reasons Avalancha adopted bitcoin is because the company believes it simply offers consumers the most convenient way to way for goods, explaining:
"We are focused on giving the best online experience available to our customers and I believe it's much easier to pay with bitcoin than it is to pay with wire transfer or pay with any other payment."
Though bitcoin's price volatility may be a turnoff for merchants in developed countries, Klurfan believes that in Argentina, this pain point doesn't exist for his business or his customers.
For example, he noted that for him, dealing with currency fluctuations is simply a way of life.
"Our currency has been losing value since the day I was born," he said. "I have seen it equal with the dollar and now it's 8.25 pesos to the US dollar. [...] I don't see any difference between the volatility of bitcoin and the volatility of the peso."
Klurfan went on to explain that, as a new player in Argentina's e-commerce space, Avalancha may have been uniquely primed to capitalize on accepting bitcoin.
Klurfan sees his company as fundamentally different than other more traditional merchants, adding:
"We are 100% online, we were conceived from the beginning as a technology company."
Furthermore, this positions the company to believe in bitcoin as a technology, and to be able to better understand how it might be able to more fully realize its capabilities over time.
"I believe that since Argentina is a country that is used to unstable currencies, the adoption of bitcoin will be faster than in other places," he added.
Regulatory threat looms
Still, the biggest determining factor to the long-term success of Avalancha's bitcoin payments plan will be how Argentina's government decides to react to digital currency use more broadly.
For instance, Klurfan acknowledges that Argentina could embrace similar policies as Ecuador and Bolivia, effectively banning the use of non-fiat currencies, concluding:
"In case the government decides to crack down bitcoin, we will be very disappointed and have no choice but to adapt to the new regulatory context."
Conversations with CoinDesk and other Latin American business leaders have found there is widespread fear about how Argentina could react to bitcoin, though many are optimistic it could lead the way in bringing the innovative technology to the mainstream.
Images via Avalancha and Shutterstock