Following its decision to impose a new 35 percent withholding tax on U.S. dollar transactions, Argentina’s peso has continued its freefall. Since the announcement was made last week, desperate Argentinian savers have continued to convert their peso holdings into cryptocurrencies to hedge against devaluation.
The decision, which was intended to slow the peso’s eroding official exchange rate has not decreased the rate of capital flight from the peso. According to Bloomberg, the peso has fallen as much as 3 percent, while data from peer-to-peer exchanges shows that the ARS/BTC trading pair’s popularity continues to build momentum.
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Increased Tax Burden on USD Transactions
Prior to the new withholding tax, an existing ‘solidarity tax‘ worth 30 percent of all non-importation USD-denominated transactions was already in place. That tax targeted foreign currency purchases by Argentinian savers looking to hedge against devaluation and all USD-denominated consumer purchases, such as those carried out with credit or debit cards.
Sponsored SponsoredThe new 35 percent tax came on top of the existing tax and this time extended the net to all forex transactions except those related to purchases of healthcare services, pharmaceuticals, books, online education services, fire protection equipment, or spending related to research projects.
According to the country’s tax authority, Administración Federal de Ingresos Públicos (AFIP), the new tax will be levied against USD deposits by Argentinian savers as well as their overseas card payments.
Good bye @TeamViewer, thanks to Argentina's government it is impossible to pay your great service.
— Gustavo Acuña (@talktogus) September 18, 2020
Last year i paid usd 160/year at 40 AR$ for USD = AR$ 6.400
This year at usd 228/year at 80 AR$ for USD plus 21% VAT, 30% P.A.I.S. tax and 35% wealth tax = AR$ 38.733
Peso’s Loss is Crypto’s Gain
Exchange rate data over the past seven days shows that the peso is continuing on a firm downtrend:
Cryptocurrency markets meanwhile are quietly benefiting from the Argentinian stampede out of peso positions.
Data from Local Bitcoins and Paxful, two of the world’s largest peer-to-peer crypto trading platforms, shows that Argentinian Bitcoin purchases over the past month have significantly surged in line with the government’s strict capital control policies.
The data is in line with data from a Paxful survey carried out in August 2020 which showed that more than 73 percent of Argentinians believe that crypto is the most effective saving mechanism for preserving the value of their money.
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