As Brazil and Argentina started preparatory work for a potential common currency, Coinbase CEO Brian Armstrong floated the idea of the two countries moving to Bitcoin (BTC). This sparked various discussions over the viability of BTC as a national currency.
On Jan. 22, the two South American countries announced their preparations to discuss a plan for a common currency that will run parallel with the Argentine peso and the Brazilian real. The move could potentially create the second-largest currency bloc in the world.
As the news broke, Armstrong took to Twitter to suggest that BTC may be the right choice for the project. The Coinbase CEO described BTC as the “right long-term bet” and wondered if the two countries would consider it.
Global Macro Investor founder and CEO Raoul Pal opposed the idea. According to Pal, having a national currency that “declines 65% in the down part of the business cycle and rises 10x in the up cycle” is not ideal. The executive pointed out that businesses would have difficulties in planning and hedging in this situation.
A few community members supported Pal’s sentiment and argued against Armstrong’s idea. According to a Twitter user, the only use case for BTC is a store of value like gold. They tweeted:
The ONLY real world use case #Bitcoin can have: A store of value to back currency valuation, like Gold used to be.
— Milky (@MilkyGemHunter) January 23, 2023
Meanwhile, one Twitter user brought up the speed of transactions in the BTC network and argued that it would take too long to have BTC for daily use. However, this was immediately countered by another community member who argued that with the Bitcoin Lightning Network, BTC becomes the “best medium of exchange.”
Armstrong’s suggestions may be based on El Salvador, another Latin American country, recognizing BTC as a legal tender back in 2021. The move brought various benefits to the country like a surge in tourism in 2022, where 1.1 million people visited the country. In addition, El Salvador was able to build schools and a veterinary hospital using profits from its Bitcoin purchases.
Brazil and Argentina are no strangers to digital assets. On Nov. 29, Brazil’s Chamber of Deputies approved a law that legalizes crypto as a payment method in the country. The country’s president also signed the bill in December and is expected to take effect in June 2023. While the new law recognizes crypto as a payment method, it doesn’t make any crypto a legal tender within the country.
On Dec. 16, a province in Argentina has approved legislation to issue a stablecoin pegged to the United States dollar. The token will be available to persons over 18 years old and will be 100% collateralized by the province’s assets.