In inflation-plagued Argentina, locals are turning to “crypto caves” to acquire U.S. dollar stablecoins as the value of the Argentine peso (ARS) continues to plummet due to strict currency controls and rampant inflation. Interestingly, they are steering clear of Bitcoin due to perceived volatility.

Argentina Locals Uses Crypto to Buy USD

Argentines have difficulty accessing the dollar and similar derivatives. However, they seem to have found a way to access these assets with crypto caves. Crypto caves operate clandestinely in hidden locations, as described by Guillermo Escudero, CryptoMarket’s strategic alliances manager. These covert exchanges allow individuals to exchange their local fiat currency for cryptocurrencies, primarily USDT (Tether), at rates far superior to the official exchange rate. Given that local banks are unable to officially transact in dollars, crypto wallets have become a popular means to store dollar-pegged stablecoins.

The emergence of crypto caves can be traced back to the introduction of currency controls in the 1980s, leading to the establishment of “financial caves.” These entities operated as public money exchanges until they went underground to circumvent regulatory restrictions.

Argentina‘s unofficial exchange rate, known as the “blue dollar,” currently offers locals 1,115 ARS for $1, a significant deviation from the official rate. The country’s inflation rate hit a staggering 211.4% in 2023, reaching a 32-year high according to INDEC, the national statistics agency.

Despite authorities investigating and raiding some crypto caves, they remain a lifeline for locals seeking to trade their inflation-ridden pesos. Escudero attributes this to the government’s arbitrary restrictions on accessing the money exchange market, which should ideally be free as in other parts of the world.

However, with the expectation of currency controls being lifted under President Milei’s leadership, demand for crypto caves may dwindle as access to official channels becomes more feasible. Yet, Escudero anticipates that the high tax burden in Argentina will sustain a preference for operating in the black market.