Hand Over Your Dollars! Argentinian Government Issues Pseudo-Currency In Exchange For US Tender

Just at a time when the world of virtual currency has moved itself on with highly advanced electronic versions of which are now extremely valuable against standard-issue currencies as is the case with Bitcoin Bitcoin While some may still be wondering what is Bitcoin, who created Bitcoin, or how does Bitcoin work, one thing is certain: Bitcoin has changed the world.No one can remain indifferent to this revolutionary, decentralized, digital asset nor to its blockchain technology.In fact, we’ve gone a long way ever since a Florida resident Laszlo Hanyecz made BTC’s first official commercial transaction with a real company by trading 10,000 Bitcoins for 2 pizzas at his local Papa John’s.One could now argue that While some may still be wondering what is Bitcoin, who created Bitcoin, or how does Bitcoin work, one thing is certain: Bitcoin has changed the world.No one can remain indifferent to this revolutionary, decentralized, digital asset nor to its blockchain technology.In fact, we’ve gone a long way ever since a Florida resident Laszlo Hanyecz made BTC’s first official commercial transaction with a real company by trading 10,000 Bitcoins for 2 pizzas at his local Papa John’s.One could now argue that Read this Term, one particular South American country appears to be eschewing technology in favor of a totally analog approach.

Argentina, a country well renowned for its idiosyncratic financial economy, which over the last few decades has been peppered with disastrous government initiatives vaguely propping the country up between financial catastrophes, has come up with its own pseudo-currency, the Cedin.

The Cedin, an acronym for Certificate of Deposit for Investment, is the latest development in a line of truly bizarre financial instruments which have gone before it aimed at boosting the nation’s totally erratic economy. This is not the first time the country has attempted something like this. Around 10 years ago, the nation issued Patacon in the province of Patagonia, southern Argentina, in order to "pay" the salaries of government employees during the financial crisis.

Argentina’s government began issuing the Cedin onto the market on July 1, from which date it allows any party with undeclared US dollars to trade them in for a certificate slip backed by Argentina’s central bank. Unlike Bitcoin and other pseudo-currencies, this is issued by Argentina’s central bank and therefore is only considered legal tender in Argentina, if of course merchants choose to accept it.

Although throughout the last 70 years the use and acceptance of US dollars in Argentina has been widespread, holding undeclared US dollars or using them for purchases has effectively been illegal in Argentina since 2011, when the country’s president Cristina Fernández de Kirchner began clamping down on dollar usage as a way to temper inflation.

The overtly cynical could of course assume that this law was passed in order for the government to relieve its population of dollars in place of the Cedin.

High-Ticket Purchases

Argentina’s government has high aspirations for the Cedin, citing it as a viable method of payment for purchasing high-value items such as property.

It is estimated that Argentinians have a combined total of $160 billion in US currency held in overseas accounts or otherwise concealed from the omnipresent eye of the government, and the introduction of Cedin is the most recent in a long line of no less than 30 measures attempted by President Kirchner to restrict access to the currency since applying laws against the use or holding of it by citizens in 2011.

Declining FX Reserves Nationwide

Argentina’s foreign exchange reserves, which its central bank uses to trade with other countries’ central banks and back its liabilities, have been falling precipitously in recent years. The central bank lost $2.84 billion, or nearly 7% of its foreign exchange reserves, in the first quarter of 2013 alone.

A potential danger in this, aside from the risk of citizens being potentially issued with a certificate of ambiguous value in place of their dollars, is that drug trafficking and illicit trading are rampant in the region, and Argentina has been discussed with a degree of vitriol by inter-governmental bodies like the Financial Action Task Force for not adhering to international anti-money laundering standards over recent times.

According to research conducted by Bloomberg, the government is hopeful that the Cedin will trade like a “quasi-currency” within Argentina. Added to this, former general manager of the central bank Hernán Lacunza told Bloomberg during an interview that Uruguayan news outlets are already calling the Cedin Argentina’s “second currency”.

Very few analysts outside of Argentina truly believe that the Cedin will have much sway with regard to Argentinians actually handing over their dollars in place of this, as it amounts to placing faith in the Argentinian economy, the exact antitheses to why Argentinians retain dollars – faith is in the economy and the nation’s fiscal system is so jaded.

So what is the future for the Cedin? Boost to the economy by keeping up to $160 billion inside the country, an amnesty of US dollars handed over to the government, or an outlet for money laundering provided by the President as a totally legal means of offloading ill-gotten gains?

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