Why Crypto Isn't a Tool for Protest in Argentina

The idea that growing stablecoin use can offer a solution to Argentina's persistent economic and political problems doesn't accord with reality, says Leah Callon-Butler after a recent visit.

AccessTimeIconSep 8, 2022 at 1:23 p.m. UTC
Updated May 11, 2023 at 4:48 p.m. UTC
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I was in Buenos Aires on Argentina’s Independence Day, and so I went out for a piping hot bowl of "freedom soup." Called locro, this hearty stew of corn, beans and chorizo was invented centuries ago by the indigenous peoples of the Andes mountain ranges at the time of Incan empire.

These days, Argentines eat it on all their major patriotic holidays, celebrating the revival of their own culture after they kicked their Spanish colonizers to the curb in the 1810 revolution. The perfect comfort food on a (crypto) winter’s day, I sat inside a cozy local restaurant, savoring the taste of sovereignty while sipping a spectacular glass of Malbec.

But outside, national tensions were boiling over. Thousands of people had emerged from their homes and convened on the streets for a "cacerolazo." Derived from the Spanish word, cacerola, literally meaning stew pot, a cacerolazo is a nonviolent form of demonstration where protestors bang on pots and pans. I felt drawn to join them in the chilly July air, and together, we chanted in metronome to the clang of a thousand saucepan lids:

Ar-gen-tina, tee- tee- teena! Ar-gen-tina, tee- tee- teena!

Ar-gen-tina, tee- tee- teena! Ar-gen-tina, tee- tee- teena!

For decades, Argentines have been banging on about political dysfunction and instability, widespread corruption, constant boom-and-bust cycles and raging inflation. And historically, they have made enough noise to score rights, rewrite laws and cause governments to collapse. Like in 2001, when the government froze the bank accounts of 18 million Argentines, a cacerolazo ousted four presidents in three weeks. Or in 2012, another cacerolazo prevented then-President Cristina Fernández de Kirchner from changing the country’s constitution so that she could run for re-election.

Despite those stopgap victories, Argentina is still a dog’s breakfast politically and economically. Inflation is out of control. The country narrowly avoided default on a ginormous International Monetary Fund debt, which would have been the 10th time in history it had failed to pay its debts. The economic minister has since thrown in the towel. And Fernandez, who has been vice president since 2019, just survived an assassination attempt.

Amid all this, I’ve seen many articles romanticizing crypto’s role in alleviating Argentina’s agony. They say it is a tool for freedom. They say it's bringing economic independence. They imply that these stablecoin-HODLing Argentines are economic dissidents using crypto as a weapon to fight for a new financial paradigm. Which is probably to be expected. After all, encoded in Bitcoin’s genesis block was a poignant reference to the banks being bailed out amid the 2008 global financial crisis, and as such, the crypto community has always loved to tout its technology as a tool of dissent. But Argentina’s craving for stablecoins is no indicator of revolution.


To put this into perspective: Yes, inflation is bad everywhere right now. But in Argentina, it’s running over 70% and will likely go triple digits by year’s end which sounds insane, but isn’t unheard of. Between 1975 and 1990, Argentina averaged 300% inflation as the government printed pesos and sprinkled them over the economy amid a debt crisis. While I was there, I heard that Argentines had become so used to their money losing value, that as long as wages were increasing in tandem with prices, many would quit pot-banging and go back to eating celebratory soup.

“Pretty much the whole Argentine people knows that the currency is bad; we’ve kind of been raised with dollars in our mind because it's a much harder currency than ours,” said Mariano Di Pietrantonio, who heads strategy at Maker Growth, a core unit of MakerDAO, the lending platform that powers the DAI decentralized stablecoin. DAI is much loved by Argentines, and Di Pietrantonio pointed to the country’s currency controls, or El Cepo, as the reason why.

Argentina’s craving for stablecoins is no indicator of revolution

Amid persistent market uncertainty, Argentina’s appetite for the stability of USD had become so large that it began to drain the central bank’s own reserves. In response, the government set a price for dollars – a price that made the peso appear to be stronger than it was and put a lid on how much the people could buy. In 2011, it was $10,000 a month. Today, it’s $200 a month, and the “white dollar,” as it’s known, also slaps buyers with a 65% tax. It’s an attempt to stabilize the economy, but all it has done is create a big black market.

Go for a stroll in downtown Buenos Aires and you get these creepy dudes approaching you from the shadows. For a fee, they chaperone tourists (and locals) into little stalls where the “blue dollar” can be bought and sold outside of the formal channels at a price that isn’t enforced by the banks, meaning it’s closer to what the market is actually willing to pay for pesos. It’s one of many options on a color-coded price list for people buying USD in Argentina.

Trading USD outside of the formal channels is illegal, but everybody does it. And if Argentines can’t change their pesos into USD, they buy something else. They stock up on groceries, or pay bills, or buy furniture, or grab a Mother’s Day gift for next year. They will buy anything that lets them lock in the price of goods today in fear that it will be unaffordable by next week.

(Alejandra Fisichella/EyeEm/Getty Images)
(Alejandra Fisichella/EyeEm/Getty Images)

Stablecoin premium

You needn’t be a crypto maxi to see how crypto is an attractive alternative in an economic landscape as nightmarish as this. First, there’s no limit on how much you can buy. But also, crypto never sleeps, and so it can be acquired any time, unlike dollars that are accessible only during business hours. It’s no surprise then, that, after their economic minister called it quits on a Saturday, Argentines bought three times the volume of stablecoins they normally would on a weekend. Rather than sit on their hands, they paid a premium to buy stables. Staring down yet another political crisis, they knew that no amount of pot-banging will prevent their savings from going poof after market uncertainty kicks into overdrive.

That was the weekend before I landed in Buenos Aires in early July, and since then, Argentines have withdrawn over $1 billion in dollar deposits from the banking system. Where those dollars end up is hard to follow. Most of it is probably stashed under mattresses, but at least some of it got converted to crypto through centralized exchanges like Ripio, which reported the pump in stablecoins. Argentina requires crypto traders to link and verify their bank account. So for those without one, or who wish to trade outside of the formal system, they go to peer-to-peer (P2P) via grassroots groups that have flourished on WhatsApp and Facebook. It’s impossible to measure but I suspect the P2P sector dwarfs the regulated market.

You can see this as a sort of passive protest. And if cryptos like DAI are adopted widely enough via decentralized communities that exist outside of the formal systems, this makes it tougher for the government to introduce anti-crypto regulation without incurring a political cost. But this rhetoric assumes that the holders of stablecoins do so with intent to change or dismantle something, when really, they are probably just sick and tired of protesting. Stablecoins are the closest they can get to what they truly want, that is, USD. Or better, a peso that doesn’t keep them awake at night.

Every day that crypto is not regulated in a third-world country, it will be difficult for the regulators to do it without a political cost

When Di Pietrantonio led the introduction of DAI to Argentina in 2018, before USDC existed and Tether was still running on the Omni protocol, he saw that crypto exchanges like Binance and Bitfinex were occupied by speculators buying volatile assets like bitcoin. Instead, he wanted to reach the “sheltering people” who didn’t desire crypto because it might increase in value, but because it might not become worthless. His strategy proved successful: Argentina is now in the world’s top 10 for crypto adoption.

Even so, he says there’s no local DAI community in the sense that Gary Vee would evangelize it. “They’re not DAI-hards,” he told me, admitting that stablecoins are just a commodity for Argentines. As long as it will hold its value, they’ll go with DAI, USDC, USDT, whatever is the most liquid. “There's not much differentiation, to be honest,” he said.

Additionally, in a country starving for stability, where nearly 40% live below the poverty line, the holders of DAI probably didn’t mint it, since people who mint an over-collateralized algorithmic stablecoin tend to have … a lot of collateral. According to Di Pietrantonio, the average mint via the MakerDAO protocol is around 100,000 DAI. Of course, it’s a trustless protocol, and so there’s no way to know who those people are, but they likely don't fit the profile of an Argentine "HODLer." Mariano said the average local transaction is more like $200 to $700.

From this, I also assumed that Argentines were active consumers of DAI, but not investors in MakerDAO who were concerned with running the protocol and thus holding the MKR token in order to participate in governance.

“No,” said Di Pietrantonio when I asked for his thoughts on it. “Governance and DAOs are another monster.”

No protest

In any case, crypto has certainly caught the government’s attention. Case in point: The Buenos Aires government announced this year that it would allow residents to pay their taxes in crypto. The move was applauded by blockchain evangelists across the world, but when I asked locals about it, they rolled their eyes and said no Argentine was dumb enough to fall for a Trojan Horse. Aside from the idiocy of linking their wallet address with their government-issued identity, the initiative totally missed the appeal of holding stablecoins amid an inflationary environment.

“We use the hard currency for savings, not for payments,” Di Pietrantonio said, pointing to Gresham's Law. Following the theory that people will use bad money over good money to pay for stuff, he posited: If you had a DAI, a dollar and a peso, which would you use to purchase a hamburger?

If you answered pesos, you would be correct, because no one wants Argentine pesos.

As for the political signaling, Fernandez, the vice president, has said she’s open to Argentina adopting bitcoin. But Di Pietrantonio warned that this shouldn't be confused as a sign that the government wants to empower its people.

“They don't care if it is good for the people, they only care what is good for them,” he said, rattling off some of party lines that politicians love to cite, like, "We won’t clamp down on crypto," or "We won’t stifle innovation, blah blah."

"It is just a pitch for the popular vote, especially among upper-middle-class voters who hold crypto purely because they have some level of wealth to protect. Every day that crypto is not regulated in a third-world country, it will be difficult for the regulators to do it without a political cost,” Di Pietrantonio said.

The crypto community loves to hype adoption stories like Argentina’s, but sometimes a slice of humble pie is in order. There’s a difference between an active, politically charged protest that demands real change versus the coping measures we adopt out of necessity in order to survive amid the kind of adversity that is largely outside of our control. Crypto is a safe haven, a bomb shelter, peace of mind and a store of value for people trapped in a place where “value” is fleeting. And it does an excellent job at that.

But it doesn’t prevent the prices from going up, or quell political tensions, or stop corruption, or settle a country’s IMF debt any sooner. When I was there, lost inside the cacerolazo alongside all the old ladies and their pots and their pans, I felt a sense of patriotism. Argentines hold a lot of DAI, but they hold even more hope for a better Argentina. And for real revolution, kitchen utensils still speak greater volumes than magical internet money.


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Leah Callon-Butler

Leah Callon-Butler is the director of Emfarsis, a Web3 investment and advisory firm with special expertise in strategic communications. She is also a board member at the Blockchain Game Alliance.