Argentina’s currency troubles have been well documented for years. With inflation between 10 and 11% per year for most of the past decade, Argentinians have actively looked to subvert the country’s strict capital controls and obtain alternative stores of value. Historically, that has meant underground dealing in USD and EUR, but more recently has led to interest in the largely-unregulated world of bitcoin. BitPagos, a Latin American payment processing company in the latest class of the Boost.vc Accelerator, is capitalizing on that interest by adding bitcoin to their processing options.
Argentinian interest in bitcoin is a natural evolution for much of the citizenry. The country’s consistently opaque currency debasement has led to conflicting inflation reports, with some economists estimating inflation as high as 24%, or nearly 2.5x the government’s officially stated rate. The devaluation of the Argentine Peso (ARS) has led to significant demand for foreign currencies, most notably the US dollar.
The cycle of debasement and subsequent market selling of the ARS led the government to institute capital controls, limiting the rate and volume of ARS to USD exchange allowed within the country. As one might expect, demand for alternative currencies remained strong and developed into what has become known as the Blue Dollar, or USD traded freely (and more expensively), beyond the mandated rate and volume dictated by the government.
As we covered in more detail earlier this year, demand for bitcoin spiked among Argentinians, though most had limited means of obtaining the new currency alternative. While LocalBitcoins has proven to be an option in nearly every major region, banking controls on international exchange volume have proven to be a notable barrier for large scale transactions, despite the overwhelming demand.
BitPagos’ payment processing platform may serve as a creative solution to this issue. The company focuses on Latin American markets, most notably Argentina – the home of its founders. BitPagos helps bring bitcoin into Argentina’s local economy without the need to exchange ARS by targeting merchants who are likely to see business from tourists, such as hotels and restaurants. According to Sebastian Serrano, the company’s CEO, some merchants have even been able to pay their suppliers with the newly obtained bitcoin.
BitPagos processes credit card and bitcoin transactions for merchants, recently reaching a volume of $10K per week combined – most of it still from credit cards. Serrano informed us that merchants initially swapped most of their bitcoin payments to fiat, but many now hold between 1 and 10 BTC as they become more comfortable and continue to transact with it. Helping BitPagos facilitate those swaps is Cryptocambios, an Argentine bitcoin exchange. BitPagos recently began expansion into Chile as well, where they are partnering with newly-formed Yaykuy for fiat swaps.
Regulation around bitcoin has yet to be clearly defined in Argentina, though that may change soon. With the opening of the Cryptocambios exchange and potentially more exchanges as well, bitcoin is likely to draw the eye Argentina’s government, as it has in so many other countries around the world. Argentina’s historically strict capital controls and shaky economic landscape would make it surprising for the government to be accommodating. But, as those matters develop, BitPagos looks to be a creative way to facilitate capital flow into Argentina, be it in bitcoin or otherwise.