After the resignation of the economy minister, Argentina sought refuge in stablecoins
Argentines bought between two and three times as many stablecoins after the resignation of the country's economy minister Martin Guzmán on Saturday amid an economic crisis, crypto companies there told CoinDesk.
Customers wanted to protect themselves against a potential devaluation of the Argentine peso (ARS), whose purchasing power has plummeted over the past year as inflation has soared, according to three major cryptocurrency exchanges.
Following Guzman's resignation, the peso lost roughly 15% of its value against the stablecoins DAI and tether on the platforms of several major local exchanges. Both stablecoins increased in value over the weekend, from ARS 245 on Friday to ARS 280. (Tether quotations on Argentine exchanges increased to ARS 303 per coin following the late Sunday appointment of Silvina Batakis to succeed Guzman as the new minister of economy.)
"Whenever there is one of these news stories in Argentina, because of the 24/7 nature of crypto, it is the first market where Argentina starts to look for a price for the U.S. dollar. This drives volumes up," according to Sebastian Serrano, CEO of Ripio, an Argentinean cryptocurrency exchange, in a statement to CoinDesk.
Guzmán's resignation is the latest repercussion of a dispute between Argentine President Alberto Fernandez and Vice President Cristina Fernández de Kirchner over the country's economic course, which led to a 60 percent increase in inflation in May over the same month last year.
Additionally, the central bank of Argentina is running low on foreign exchange reserves, which has a negative impact on imports among other things.
According to the company, "many people" used their DAI as collateral to obtain loans in Argentine pesos and buy more DAI as insurance against a potential peso devaluation. The Argentine exchange Buenbit reported a 300 percent increase in trading on Sunday compared to the same day in prior weeks.
According to several local media reports, the government could declare a foreign exchange holiday on Monday to calm markets.
Most Argentine exchanges increased the spreads between bid and ask prices to 18%, when normally they are around 2 percent, as a result of the absence of price references for the U.S. dollar over the weekend.
In a tweet on Sunday, Pablo Sabbatella, the creator of the Latin American-focused cryptocurrency education platform DefyEducation, stated that "Exchanges added a giant spread so that people don't trade and they [the exchanges] hedge against tomorrow's opening price."
According to Andrés Vilella Weisz, head of trading and strategy at the Argentine crypto exchange Lemon Cash, "due to demand and without a reference replacement price, prices rose and spreads widened." He also noted that after Guzman's resignation, demand for crypto dollars was high.
By fLEXI tEAM