The Argentine peso lost more than 200 percent of its purchasing power in 2023. More and more citizens are using stablecoins such as USDT. What happens next?

More and more Argentine citizens are keeping stablecoins to as a hedge against the country's economic instability and its highly inflationary national currency, the peso. Nowhere in Latin America is the adoption of stablecoins more advanced, with Tether (USDT) and the Circle USD Coin (USDC) as particularly popular.

From data from the Mexican crypto exchange Bitso shows that 60 percent of all crypto purchases by Argentines consist of stable USD coins. This contrasts with other Latin American countries such as Colombia, Brazil and Mexico, where stablecoin purchases account for only 31 to 40 percent of total crypto purchases.

Argentina's annual inflation rate rose to as much as 211 percent by 2023. Therefore, according to Bitso, the country's citizens were reacting to the current "political and economic context that has encouraged the purchase of stablecoins as an alternative to inflation and devaluation."

Meanwhile, Bitcoin accounted for only 13 percent of Argentine crypto purchases. Argentines' overwhelming preference for stablecoins over more volatile cryptocurrencies reflects the confidence the U.S. dollar still enjoys in large parts of the world.

This highlights the increasingly important role of stablecoins as a new, digital instrument for hedging savings in emerging markets. Last but not least, the Argentine adaptation shows a general need for alternative financial solutions.

During the election campaign, the new president Javier Milei also positive outlook on Bitcoin and spoke of "the return of money to its original creator, the private sector." A more crypto-friendly policy could go a long way for the country and its financial sector.