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[1/13] Last week, Argentina's version of FINCEN released a warning to institutions regarding crypto's growing usage there to evade regulation.
https://bit.ly/2A6Hdie
If you want to raise your crypto street IQ by 50 points, read below on the latest use case that has emerged:
https://bit.ly/2A6Hdie
If you want to raise your crypto street IQ by 50 points, read below on the latest use case that has emerged:
[2/13] First, a little background. Last year, Argentina imposed a 30% tax on all credit card (CC) purchases in US Dollars. That is, when a person in Argentina buys something online which accepts US Dollars, they would need to pay an amount of ARS at the official exchange...
[3/13] ... rate plus a 30% tax. Last year an example $100 purchase was as follows:
Official XR: 63 ARS for 1 USD
= 6300 ARS * 1.3 (tax)
= 8190 ARS needed to pay for something online which cost $100 USD
At that time last year, the informal market rate was only 70 ARS/1 USD...
Official XR: 63 ARS for 1 USD
= 6300 ARS * 1.3 (tax)
= 8190 ARS needed to pay for something online which cost $100 USD
At that time last year, the informal market rate was only 70 ARS/1 USD...
[4/13] ...and so the gov was confident that it could profit from this tax on its citizens. Recently however, the informal market rate has ballooned to 120 ARS while the official XR has only been allowed to rise to 68 ARS/USD.
https://bluedollar.net/
![[4/13] ...and so the gov was confident that it could profit from this tax on its citizens. Recently however, the informal market rate has ballooned to 120 ARS while the official XR has only been allowed to rise to 68 ARS/USD. https://bluedollar.net/](https://pbs.twimg.com/media/EY39CsIXYAAZ0Ol.jpg "[4/13] ...and so the gov was confident that it could profit from this tax on its citizens. Recently however, the informal market rate has ballooned to 120 ARS while the official XR has only been allowed to rise to 68 ARS/USD. https://bluedollar.net/")
https://bluedollar.net/
[5/13] This circumstance has resulted in a new use case which I will describe now:
People in Argentina are now using their credit cards to buy crypto and then selling that crypto on the informal market for a profit at the more favorable exchange rate. The math works like this:
People in Argentina are now using their credit cards to buy crypto and then selling that crypto on the informal market for a profit at the more favorable exchange rate. The math works like this:
[6/13] Buy $100 in crypto with CC
= 6800 ARS * 1.3 (tax)
= 8840 ARS needed to buy $100 of crypto.
They can then sell that crypto on the informal market at 120 ARS per dollar of crypto that they have.
$100 of crypto = 12000 ARS.
They have now turned 8840 ARS into 12000 ARS.
= 6800 ARS * 1.3 (tax)
= 8840 ARS needed to buy $100 of crypto.
They can then sell that crypto on the informal market at 120 ARS per dollar of crypto that they have.
$100 of crypto = 12000 ARS.
They have now turned 8840 ARS into 12000 ARS.
[7/13] Crypto purchases are officially banned using CC's but the Argentines I spoke to tell me that there are still a host of small and discrete websites which allow CC purchases of crypto and have not yet been blocked by the card processors in AR.
[8/13] Even as these discrete websites are progressively blocked, people are now turning to purchasing GIFT CARDS with their CC's and then selling those GC's for crypto which they can then sell on the informal market for a profit.
[9/13] In the gift card case, they currently need to sell their GC's for at most a 27% discount to achieve profit right now. But the more that the informal exchange rate diverges from the official, the more of a discount these traders will be able to accept.
[10/13] The use case I've described above is only one of literally dozens that I've uncovered in my research of many countries over the years and it goes to show that capital controls rarely work and in reality only end up wasting a lot of energy and increasing corruption.
[11/13] @franamati, admin of AR's largest Bitcoin social media group "Bitcoin Argentina" on FB informed me of this situation as well as others. Franco believes the latest warning is a consequence of Bitcoin's growing influence in AR but does not represent impending action yet.
[12/13] If action does come in the future, those most impacted will likely be crypto exchanges in AR which currently have connections with local banks. In the event that their connections are severed, volume will likely flee to more censorship-resistant P2P exchanges.
[13/13] If any part of this thread was confusing to you or you would like to know more, I recommend you read my recent analysis of Argentina, Bitcoin, and Dollarization on medium:
English: https://rb.gy/kqlvak
Spanish: https://rb.gy/kqlvak
English: https://rb.gy/kqlvak
Spanish: https://rb.gy/kqlvak
