Bitcoin Takes The Spotlight As Brazil And Argentina Mulls Creating A Common Currency
This week, Brazil and Argentina are set to declare the initiation of preparations for a shared currency, a move that could result in the formation of the world’s second-largest currency bloc.
According to a report by Financial Times, the two countries will discuss the concept at an upcoming summit in Buenos Aires and invite other Latin American nations to join. Further, they will discuss how the new currency, which Brazil suggests calling “Sur”, could help reduce reliance on the US dollar and boost regional trade.
“There will be a decision to start studying the parameters needed for a common currency, which includes everything from fiscal issues to the size of the economy and the role of central banks,” said Sergio Massa, Argentina’s economy minister.
“It would be a study of mechanisms for trade integration. I don’t want to create any false expectations. It’s the first step on a long road which Latin America must travel,” he added.
Mr Sergio further confirmed that, although the project would initially be bilateral, they would invite other nations in Latin America.
The development comes even as the two economies fight to stay afloat amid a gloomy global economic outlook. Apart from its annual inflation approaching stubbornly high levels, Argentina has also been struggling to get funding from international debt markets since 2020, with its debts to IMF alone standing at more than $40B.
Meanwhile, the upcoming meeting has sparked discussions in the crypto community, with some observers proposing Bitcoin as the best option for the two Latin countries.
“Wonder if they would consider moving to Bitcoin – that would probably be the right long-term bet,” Brian Armstrong, the CEO of crypto exchange Coinbase, wrote early Monday. Others called on the two countries to follow El Salvador’s footsteps by making Bitcoin legal tender.
“Definitely would be a risky bet financially; El Salvador seems to be doing well for themselves since buying BTC daily. I’d be curious to see if Brazil will ever convert to BTC,” another wrote.
However, some members seemed opposed to the idea, with Real Vision CEO Raoul Pal casting doubt on the cryptocurrencies volatility. According to the businessman, “no one can have a national currency with 100% volatility that declines 65% in the down part of the business cycle and rises 10x in the upcycle.”
He was, however, quickly reminded that onboarding a combined population of 265M million people with hopes of expanding to other Latin American countries would help considerably with volatility. Moreover, unlike Bitcoin, fiat currencies were at risk of losing their value to zero due to external pressures.
“That (BTC) still sounds better than using the peso that has 90% annual inflation, controlled by a government that has a history of 9 debt defaults in the last 80 years. Argentina needs Bitcoin,” one tweep told Pal.
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