Brazil and Argentina recently announced their plans to discuss a common currency that will run parallel to the Argentine peso and Brazilian real, potentially creating the second-largest currency bloc in the world. As the news broke, Coinbase CEO Brian Armstrong suggested on Twitter that Bitcoin (BTC) may be the right choice for the project. Armstrong described BTC as the “right long-term bet” and wondered if the two countries would consider it. However, Global Macro Investor founder and CEO Raoul Pal opposed the idea, stating that having a national currency that “declines 65% in the down part of the business cycle and rises 10x in the up cycle” is not ideal for businesses.
Armstrong’s suggestions may be based on El Salvador, another Latin American country, recognizing BTC as a legal tender in 2021. The move brought various benefits to the country, including a surge in tourism and the ability to build schools and a veterinary hospital using profits from Bitcoin purchases.
Brazil and Argentina are no strangers to digital assets. In November 2022, Brazil’s Chamber of Deputies approved a law that legalizes crypto as a payment method in the country. The law is expected to take effect in June 2023, but it doesn’t make any crypto a legal tender within the country. In December 2022, a province in Argentina approved legislation to issue a stablecoin pegged to the United States dollar. The token will be available to persons over 18 years old and will be 100% collateralized by the province’s assets.
It remains to be seen what the outcome of the discussions between Brazil and Argentina will be. While the idea of a cryptocurrency as a common currency is intriguing, it is important to consider all of the potential challenges and drawbacks before making a decision.
