Coinbase CEO Proposes Bitcoin as a Solution for South American Countries Seeking a Common Currency

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Brian Armstrong, Coinbase’s CEO, has just tweeted that Bitcoin could be the long-term solution for Argentina and Brazil’s financial troubles. The South American countries have long been looking for a common currency, and Armstrong suggests that Bitcoin is the best option.

Just three days ago on the 22nd, the two countries have announced that they’re preparing framework for a common currency. It is supposed to run along the Brazilian Real and Argentine Peso. This currency could be used in both countries and would simplify things a lot when it comes to trade. Also, the move could create a major second-largest currency block and will surely have repercussions in regards to the Dollar trade market.

Bitcoin is the Middle Ground

While no side has announced anything yet, Armstrong’s proposal could be a smart move. By adopting Bitcoin, both Argentina and Brazil will finally test the waters they’ve wanted to for so long. Both countries have flirted with Bitcoin in the past, seeing it as a solution to their struggling financial systems.

As news broke over the proposed common currency, Bitcoin was suggested as a middle ground. The idea was given legs by Coinbase’s CEO on Twitter, although both sides have stayed mum on the proposal.

There are opponents to such a move. Global Macro Investor founder Raoul Pal is against the idea. In his own words, a ‘currency that declines 65% in the business cycle and goes up 10x’ is not an ideal pick. Others will also cite the volatility as the biggest obstacle to such a move. Hedging and planning would become nearly impossible in that kind of situation, although it could open up the field for profit if the price goes through a correction.

Armstrong’s suggestion was based on El Salvador. The small South American country officially accepted Bitcoin as legal tender in 2021. It has been buying the dip since then, and while official records say something else, the results have been a mixed bag. On the other hand, the country has experienced a surge in tourism in 2022, and profits from Bitcoin purchases are used to build churches and schools, so it’s not all bad.

No Strangers to Digital Assets

Argentina and Brazil are no strangers to Bitcoin or other digital assets. Last year, Brazil’s Chamber of Deputies approved a law that legalized cryptocurrencies as a payment method. Brazil’s outgoing president signed the bill before the new year arrived, and it should be in effect in June this year.

Just before 2023, Argentina approved legislation to start using a new stablecoin pegged to the US Dollar. It’ll be 100% collateralized by the province’s assets and available to all Argentinians over the age of 18.

The countries have been looking for a common currency to use in trade that will make trading goods much easier. Armstrong’s proposal could be a great idea, but we’re yet to see if any of the sides is open to it at all.

January 25, 2023: • No Comments

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