SoylentNews

Bitcoin Disrupting Argentina's Financial System

posted by CoolHand on Friday May 01 2015, @10:28PM   
from the who-said-fake-money-would-never-be-worth-anything dept.

Phoenix666 writes:

Thanks in part to Argentina's volatile financial markets, bitcoins are helping people there cut out the banks and government entirely in their financial transactions:

That afternoon, a plump 48-year-old musician was one of several customers to drop by the rented room. A German customer had paid the musician in Bitcoin for some freelance compositions, and the musician needed to turn them into dollars. Castiglione [the bitcoin moneychanger] joked about the corruption of Argentine politics as he peeled off five $100 bills, which he was trading for a little more than 1.5 Bitcoins, and gave them to his client. The musician did not hand over anything in return; before showing up, he had transferred the Bitcoins — in essence, digital tokens that exist only as entries in a digital ledger — from his Bitcoin address to Castiglione’s. Had the German client instead sent euros to a bank in Argentina, the musician would have been required to fill out a form to receive payment and, as a result of the country’s currency controls, sacrificed roughly 30 percent of his earnings to change his euros into pesos. Bitcoin makes it easier to move money the other way too. The day before, the owner of a small manufacturing company bought $20,000 worth of Bitcoin from Castiglione in order to get his money to the United States, where he needed to pay a vendor, a transaction far easier and less expensive than moving funds through Argentine banks.

Do any Solentils manage their transactions in bitcoin? What are your experiences?

• Re:Shady (Score: 5, Informative) by demonlapin on Friday May 01 2015, @11:34PM

  by demonlapin (925) on Friday May 01 2015, @11:34PM (#177677) Journal

  Disclosure: didn't RTFA, just assuming this is the same basic story covered at The Other Site the other day. You don't need to keep a lot of bitcoins around; they can be bought and sold as needed. The basic mechanism is:

  1. Foreign Buyer wishes to purchase valuable item from Argentine Seller, transferring hard currency into Argentina.
  2. Argentine Seller uses service (run by Money Launderer) that buys Bitcoin in Foreign Buyer's currency, charged to his credit card there, thus avoiding Argentine capital controls, taxes, etc.
  3. Money Launderer provides Argentine Seller with Argentine Pesos equivalent in value to Bitcoins (this uses the unofficial exchange rate, which means more pesos in his pocket).
  4. Money Launderer then purchases US dollars (or Euros, Swiss francs, what have you) with the Bitcoin.
  5. Money Launderer transfers these hard currencies to well-off clients' foreign accounts. Said clients presumably pay the fees that make the whole thing operate; the "legit" way to move your money out of the country results in about a 30% loss of value between taxes and having to use the "official" exchange rate, so merely 20% would be a bargain and allow Money Launderer to provide the merchant-service side of the process free of charge while still making money.
  6. Rinse and repeat.

  The key is that the money flowing into Argentina limits how much can flow out (the wealthy launderees have the pesos to put in people's hands, but you need to intercept the hard currency before it enters the Argentine financial system). More coming in means more can be laundered. You could do the same thing with anything for which there is a reasonably liquid market, but BTC has low transaction costs and can be bought and sold electronically. No need to smuggle physical objects, just transfer BTC and watch the block chain for confirmation.

  Parent

  Starting Score:	1		point
  Moderation		+3
  Informative=3, Total=3
  Extra 'Informative' Modifier		0
  Karma-Bonus Modifier		+1
  Total Score:		5