As Brazil and Argentina began preparatory work on a potential common currency, Coinbase CEO Brian Armstrong introduced the idea of the two countries switching to Bitcoin (BTC), which has sparked various discussions about the viability of BTC as a national currency.
On January 22, both South American countries he announced they are beginning to prepare for the creation of a common currency that would run parallel to the Argentine peso and the Brazilian real. The move could potentially create the second largest currency bloc.
Armstrong took to Twitter when the news broke propose that BTC would be “the right long-term bet” and I wonder if both countries would consider it.
Founder and CEO of Global Macro Investor Raoul Pal contradictory idea. According to Pala, it is not ideal to have a national currency that “falls 65% in the down part of the business cycle and rises 10 times in the up cycle”. The executive pointed out that businesses would have difficulty planning and provisioning in this situation.
Several members of the community echoed Pal’s sentiment. According to one Twitter user, the only use case for BTC is as a store of value like gold. They tweeted:
The ONLY real world use case #Bitcoin can have: A store of value to support the appreciation of currency, as gold used to be.
— Milky (@MilkyGemHunter) January 23, 2023
Meanwhile, another Twitter user brought up the slow speed of transactions on the Bitcoin network and argued that they would take too long for everyday use. However, this was quickly countered by another community member who he argued that with Lightning Network, BTC becomes “the best medium of exchange”.
Armstrong’s proposal may be based on the fact that El Salvador, another Latin American country, has recognized BTC as legal tender as early as 2021. This move has brought various benefits to the country, such as increase in tourism in 2022, with 1.1 million people visiting the country. In addition, there was El Salvador able to build schools and veterinary hospital using profits from bitcoin purchases.
Brazil and Argentina are also no strangers to digital assets. November 29 Brazilian Chamber of Deputies passed a law legalizing cryptocurrencies as a payment method in the country. brazilian president signed the bill in Decemberand is expected to take effect in June 2023. While the new law recognizes crypto as a payment method, it does not make any cryptocurrencies legal tender in the country.
December 16. province in Argentina approved legislation to issue a stablecoin pegged to the US dollar. The token will be available to people over the age of 18 and will be 100% backed by the province’s assets.