Argentina has imposed currency controls in an attempt to stabilize financial markets as the country faces a deepening economic crisis.
Per this temporary measure — announced on Sunday — the central bank is now authorized to restrict the purchase of US Dollars, the government said in a decree published in its official bulletin.
This means companies will now need permission from the central bank to purchase foreign currency and make transfers abroad. Individuals will be limited to dollar purchase of $10,000 a month.
The central bank has set a limit of 5 days for exporters to repatriate foreign currency.
“They are not measures for a normal country,”
said Treasury Minister Hernan Lacunza.
“If we do not do it, the consequences would be serious.”
The announcement came as the nation’s currency crisis spirals out of control. $3 billion were drained out of foreign currency reserves in two days before the weekend as the government struggled to repay debt and slow the drop in peso.
If it keeps losing money at this pace, the country risks exhausting its net reserve, that stands at about $15 billion, within weeks.
High Inflation, Currency Crisis, and Deep Recession
The government of the third-largest economy of Latin America said in the decree that it would
“regulate more intensely the currency exchange regime and strengthen the normal functioning of the economy.”
The move came after a sharp drop in its currency peso.
Macri’s government and the central bank are trying to stabilize the economy ahead of the presidential election on October 27, for which Fernandez de Kirchner is the front-runner.
Argentina has been struggling with a financial crisis that was exacerbated by President Macri’s defeat in a recent poll.
Macri was elected in 2015 on the promise to boost Argentina’s economy with a series of liberal economic reforms.
But the country is in deep recession now, with one of the world’s highest inflation rates at 22% during the first half of the year. Three million people have fallen into poverty over the last year.
The peso also fell to a record low (more than 30%) last month.
Situations like these are exactly that strengthens the case for Bitcoin.
BREAKING: As of today, Argentina's citizens cannot purchase more than $10,000 in US Dollars.
This capital control by the central bank also includes transferring existing investments to USD.
This is why we need private, unseizable money.
— Rhythm (@Rhythmtrader) September 1, 2019
Last month, Bitcoin was trading higher in Argentina than the rest of the market. The fragile economy and currency crisis have prompted premium trading on Bitcoin. The lowest offer was 8% higher than the price on Bitstamp and the highest one has been up 28%.
“Bitcoin may be a risky asset for investors but for some, it is clearly a safe haven,”
Mati Greenspan, eToro analyst said at that time.
Bitcoin price that dropped to $9,300 level on August 29, went above $9,750 on August 2nd and further surged to $9,865 today.
“Governments have a knack for telling people what they can and can't do with their money. #WhyBitcoin. Taxes are understandable, quotas unacceptable,”
wrote economist and trader Alex Kruger after the news break out.
Buy Bitcoin https://t.co/TkceSXvIYK
— Preston Byrne (@prestonjbyrne) September 1, 2019