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In an effort to promote "currency competition", a key campaign promise of President Javier Milei, Argentina has officially sanctioned electronic retail payments in US dollars.
Last week, the Central Bank of the Argentine Republic (BCRA) approved a new set of regulations that will allow consumers to choose which currency they use to make electronic payments.
The BCRA has ordered all acquirers and sub-acquirers to develop the necessary technology for their merchants to accept debit card payments in US dollars, and to implement it by February 28, 2025.
Acquirers and sub-acquirers must also develop similar technology for debit card transactions made via Argentina’s interoperable QR code system. However, the measure will not apply to QR code-based transfers, credit card transactions or prepaid card transactions.
Responding to questions on X about how the new system will work, finance minister Luis Caputo said that the buyer will choose which currency to use, and prices must be displayed in pesos and in dollars.
“The debit card debits the pesos or dollars directly from your account (using the same card for both currencies),” he said.
“That is, there is no exchange transaction. Obviously, you must have dollars in your savings account. You can also pay via QR.”
Finally, the BCRA has created a new variant of its recurring instant debit (DEBIN) transfer service, which will allow DEBIN payments to be made in US dollars.
The BCRA noted that, when using US dollars, the anti-fraud controls added to DEBIN payments in 2023 will continue to apply.
From December 1, 2023, financial institutions and payment service providers (PSPs) have been required to show a consent request message to each customer whose account will be debited.
A DEBIN is an online transfer in which the payee initiates the payment agreement, and the payer only has to accept it.
The recurring DEBIN was created so that businesses can charge customers for services provided on an ongoing basis.
However, as noted by the BCRA, recurring DEBINs may not be used by businesses offering gambling or lottery services.
A Milei campaign promise delivered
In 2023, Argentina’s monthly inflation rate averaged at almost 130 percent, but rose to 160 percent in November, when the final round of the presidential election took place.
Inflation was a key campaign issue for all candidates, including Javier Milei, who promised to introduce a system of “currency competition” that would allow Argentinians to transact more freely in US dollars if they preferred.
Unofficially, currency competition was already taking place prior to Milei’s election, but much of the competition was between the peso and the thriving black market for US dollars.
US dollars obtained from “arbolitos” (unlicensed, street-side money changers) are widely used in retail transactions in Argentina.
They are also widely hoarded as an inflation hedge, and are commonly spirited out of the country to deposit in foreign bank accounts.
US dollar bills obtained from licensed foreign exchange providers are also widely used (although these come at a higher premium), including in Argentina’s real-estate market.
According to BuySell BA, a realtor based in Buenos Aires, “almost all” real-estate transactions in Argentina take place using $100 bills.
In effect, Milei’s new system of currency competition will formalise a large proportion of US dollar retail transactions, and will also help to discourage Argentinians from turning to the black market.
Discussing the new measures on the La Nación news channel last week, Milei said he is confident that Argentinians will flock to the US dollar if given the choice.
“The Argentinian peso is useless,” he said. “When you allow currency competition, what will happen? Argentinians will choose to use the US dollar.”
He also said that currency competition will allow the BCRA to focus on reducing its balance sheet rather than further intervening in the nation’s money supply.
Finally, quoting Caputo’s announcement of the new rules, Milei posted on X: “CURRENCY COMPETITION. LONG LIVE FREEDOM, DAMN IT.”
