How Crypto Is Transforming Argentina's Economy

Dear Bankless Nation, for the month of August, I've been in Argentina attending ALIF, the crypto pop-up city in the heart of Buenos Aires. One part Zuzalo, one part Dev Connect. Goal of ALIF is to give the crypto industry here in Argentina, which is already very strong, a shot in the arm in order to formally lock it in as a part of the Argentine economy. With Javier Malay's election last December, there is a unique window of opportunity that crypto has in Argentina. Argentina is one of the few countries with strong bottom-up support. And now it has an administration who is deeply crypto in spirit. ALIF is trying to seize the opportunity that the Malay administration has presented to the crypto industry and formally lock in pro-crypto regulation along with crypto support for the industries and startups that are present here in Argentina. At the ALIF Hub, a 1,000 person co-working space, crypto startups, venture capitalists, and the Argentine government have all met and mingled for a month of collaboration, support, and growth. While ALIF is just a one month event that will eventually come to an end, the sparks it ignites will hopefully spread into a wildfire across the country of Argentina and then all of Latam.

This wildfire is what we call crecimiento or growth in the crypto vernacular of Argentina. But why Argentina? Argentina is the spearhead of crypto.

While developed nation venture capitalists and crypto twitter hypothesize about use cases and adoption and attracting retail investors, in Argentina, crypto has already been adopted by millions of people who have a present and urgent need for crypto's value and services.

Argentina is the perfect breeding ground for the crypto economy.

The intersection of easy internet access, currency inflation, capital controls, and traditional business frictions have produced an environment in which the power of crypto can truly shine.

This recent GWART tweet made me chuckle, but the irony here is that in Argentina, millions of well adjusted adults with nine to five jobs with monthly expenses and obligations have all found crypto to enable them to live their lives better and easier than the status quo. This satirical GWART tweet reads retail is coming.

You know, well-adjusted adults with nine to five jobs with monthly expenses and obligations. They're coming to trade digital commodities with us. That's what they're going to do. Just be patient. Retail is on the way. There's a stark difference between the crypto economy of Argentina and the perceived use cases and metas that are often hypothesized about on crypto Twitter.

Local Argentines can't afford to bet on the next shiny Alt Layer One or be in the meme coin trenches. Their money is going to be worth 1% less tomorrow.

And 1% less again the day after that, as it has been for all of their lives. Of course, Argentina has its crypto natives who play in the DGEN games, but D gen activity is dwarfed by the millions of Argentine citizens who don't care about crypto and couldn't care less about the fake world that DGens on Crypto Twitter have generated, but nonetheless are using their favorite crypto app, Lemon, Bello, Buen Bit, or Ripio, to escape inflation, buy coffee, and protect their wealth.

In Argentina, crypto is real. While the government of El Salvador has been praised by Bitcoiners for its Bitcoin forwardness, the citizens of El Salvador do not share similar excitement for the country's top-down investment into Bitcoin.

In contrast, the citizens of Argentina are truly excited about crypto, or at worst, are indifferent.

Not every Argentine uses crypto, but its usage is normalized and culturally accepted by all. The average Argentine has either directly had their lives materially improved by crypto due to easy access to dollars, payment services, or bankless banking, or they know someone who has.

The bottom-up support and acceptance of crypto is stronger in Argentina than anywhere else in the world.

A north star of Crescimiento and the A-lift pop-up city is the belief that Argentina is just 100 good startups away from a wildfire of crypto-enabled economic growth and prosperity from spreading across the nation. Just 100 more startups, creating 5,000 more crypto powered jobs, bringing the value of crypto into Argentina. And Argentina will become the first country to reach crypto escape velocity and become the first end to end crypto powered country on Earth. At ALIF, 67 crypto startups from pre C to Series A are working together at a common co working space, collaborating on problems, and supporting each other along their way.

Twenty-two mentors from venture capital firms, crypto teams, and successful entrepreneurs are present at the hub, offering their time, advice, and perspective in order to pass wisdom onto the younger generations of startups.

Every day at the ALIF Hub, there is a university quality curriculum of the skills needed to build in Web3.

Workshops, talks, and mentorships were available from some of the industry's most technical frontiers. And a huge shout out to ZK Sync here. Overwhelmingly, startup builders and hackathon attendees cited the presence and support of the ZK Sync team were able to provide at ALIF. The third week of ALIF was a ZK week, and the ZK Sync Latam Devreil team went above and beyond providing education in both Spanish and English for the builders here.

Here's a snapshot of what a day at ALIF just looked like for the builders. And here for the podcast listeners, there is just a daily itinerary of some of the activities, starting with like morning health stuff, run run club, yoga, guided meditation, and then uh ZK City Bootcamp or Road to VC Investment in Argentina, or the ALF Weekly Showcase where people can demo what they're building. Uh Sam Richards presented near Zero Knowledge Products. Uh World ID was presented by the WorldCoin team. Uh Alex Klukowski, the Matter Lab, ZK Sync founder, gave a presentation about ZK. Uh Lisa from Aztec, Kyle from Phoenix, Starknet hosted a meetup. There was also an intro to smart contracts and solidity for certain the younger devs. And then, of course, a happy hour at the end of the day. This was just one day. And this is only like a third of the things that are on the itinerary of that day. On the other side of the equation, we have Malay's digital transformation, the top down side of things.

Argentina is the only country on earth that has both a strong grassroots crypto industry being met with a strong top-down pro-crypto state government.

This is the potential that Crescimiento is trying to unlock. The brand new president of Argentina, Javier Millet, is deeply crypto in spirit. With this new administration making radical changes in the Argentine government, the crypto leaders of Argentina have identified the potential of permanently embedding crypto as a part of Argentina's growth plan for the rest of the 2020s and beyond.

Javier Millet is massively pro technology, pro investment, and pro acceleration. He has an actual blockchain consultant, Sergio Morales, in his cabinet. Malay's interest in Bitcoin and crypto is part of his broader economic philosophy, which includes dollarizing the economy, stable coins, of course, and reducing government intervention.

Malay drafted legislation that balances crypto innovation and investor protections and has collaborated with some of the crypto industry to provide regulatory clarity.

Part of Malay's initial economic mega decree included the elimination of legal tender laws, allowing contracts to be denominated in any currency. These are good steps for the legality of crypto in Argentina, but there's still a long way to go. The real question for the crypto industry is can Argentina build and lock in a strong pro crypto regulatory framework that gives crypto entrepreneurs and businesses the assurances that crypto will be legal and protected for multiple decades into the future.

Can crypto protections be established that transcend past the current administration?

What if a new administration comes and attempts to wipe out the pro-crypto progress that the Malay administration has made, as has happened so many times in the past for other industries in Argentina? On the 22nd of August, ALIF hosted regulatory day, where leaders in the Malay administration came to the ALIF hub, the co working venue where the 63 startups work, in order to have a day of discussions, talks, and workshops, all focusing on what crypto businesses and startups need out of the Malay administration. It's not just Malay.

Here's a picture of the previous president of Argentina walking in the A-Left co-working space with his ZK Sync team holding the Explain ZK Like I'm Five book that they created. This is like if Bill Clinton attended the ETH Denver hackathon. And I just want to highlight two things that came out of the regulation day at Crescimiento. Here's a quote from what is effectively the Gary Gensler of Argentina, Roberto Silva. And I mean Gary Gensler as in the leader of the securities administration, not the person who's trying to stamp out crypto. So Roberto Silva says, we are 100% in favor of the normalization of technology of the crypto world. The United States SEC model is to sue cryptocurrencies, claiming that they are irregular. We do not follow that model. Just one statement. And another thing that happened during regulation week was that it was announced that Ethereum and Solidity are now formally integrated into the high school education programs in Buenos Aires. So, as a high schooler, you can learn to write Ethereum smart contracts in Argentina. Unlike in the United States, the crypto industry in Argentina is deeply appreciated and encouraged by state officials. There's also the technology that was used to support ALIF.

Alef pioneered some crypto native technology being dogfooted by the 2,000 citizens at the ALF pop-up city. Quark ID and Morphe, for example. Quark ID is an app incubated by the cities of Buenos Aires that uses verifiable credentials, decentralized identifiers, and zero-knowledge cryptography to produce a user sovereign identity system for all the citizens of ALF. After purchasing my ticket to ALF, I have been issued a verifiable credential that allows my iPhone to open the door to the ALF hub and access the co working space. My rights and privileges as a citizen of ALF means I get an allowance of 100 Morphe tokens a week.

Morphe tokens are an ERC20 token on the ZK Sync Ara Main Net that are redeemable for a thousand Argentine pesos at local businesses that have signed up to accept Morphe for payment for food, coffee, or other services around the hub. A thousand pesos is about one dollar, but that's also depending on when you're listening to this. All of this is running on the ZK Sync Aero Main Net and represents a real prototype for a Belagian network state running on crypto rails. Maybe you're thinking, how did they get over 50 different businesses to accept crypto for payment?

The sales pitch for crypto as payment is pretty easy when you learn that accepting regular peso payment over fintech rails in Argentina results in a 60 to 90 day settlement time, meaning that the businesses don't get their pesos until after it's lost somewhere between 6 to 20% of its value. Last month, Argentina experienced its lowest month of inflation in over five years at 4%.

That's 4% in a month, not a year.

You think the 2.9% credit card fees are bad?

Imagine a business losing 10% due to the currency debasement simply because the banking rails are holding their money for two to three months before giving it to businesses.

When Argentine businesses are informed that they are able to get their money instantly, it's an easy sell. Later this year, Quark ID, again incubated by the city of Buenos Aires, will build their own independent elastic chain on the ZK stack and will become part of the ZK Sync hyperchain. Quark ID has plans to also build in more traditional services into their app, like a driver's license and other government issued credentials to user controlled wallets.

For all intents and purposes, if this mission succeeds, this will become the Argentina Layer two.

If you want to go further down this rabbit hole, check out the interview I did with Diego Fernandez, the Secretary of Innovation of Buenos Aires, last January. As ALIF comes to a close, the gringos, VCs, and mentors will all have to leave. We all have our homes to return to.

The ALIF co-working space is on a three-year lease and will remain open for the crypto startups to use as a common hub for the crypto industry moving forward. Support networks have been created, connections, friendships, and investments have been made. But will ALIF be the final push over the edge for the crypto industry in Argentina? Argentina certainly has more than its fair share of problems that it needs to deal with. A convoluted taxation system that even regulators know full well that means everyone is dodging taxes, business regulation constraints, not to mention decades of entrenched pseudo-communism that have held millions of voters locked in poverty as they constantly re-elect the pronists that are promising them fiscal handouts, massively contributing to inflation, and creating millions of people dependent on that government handout and leaving only a very painful path out of a very deep hole. If there's one thing that has consensus in Argentina, is that the homegrown grassroots crypto industry is one of the brightest stars on the horizon. While the Argentines I talk to are more often cynical and in despair of the future of the country, they are somehow still optimistic about the alternative tool set that they have been given and the inherent scrappiness that comes with being an Argentine. While many Argentines in crypto that I know have become fantastically wealthy thanks to the fortune of crypto, many of them have not taken that opportunity to leave the country.

They love Argentina and the people in it. It's not a place to escape from,

but instead a culture worth experiencing and a country trying to become worthy of reinvestment. I don't know if crypto can single handedly elevate Argentina the jurisdiction into higher quality living, but we've already seen crypto elevate millions of Argentinas out of poverty and free from currency debasement.

Maybe the governments in the modern age are simply too calcified to productively rebuild. That's sad.

But that's fine.

Crypto can help people help themselves, regardless if their country can. And if their country can help crypto along, then that's even better. And with that, let's get into the conversation with three Argentine crypto founders who literally have millions of users who are using their products and services. Like I said in my article, normal, well adjusted adults working in a normal nine to five job who use Lemon Cash, BuenBit, or Bellow simply to do normal adult things. They're not speculating. They're simply using crypto to save their money without losing it along the way.

We talk about the crypto industry in Argentina, how they got so many people to use their app.

The user behaviors and demographics of their companies, how they chose to manage user risk, when the choices they have made literally impact millions of people.

And what's it like to be a founder in Argentina? How has the entrance of President Millet changed things? And what are they hoping for out of crypto in Argentina? I hope you enjoyed this episode of Bankless Nation. It's rare that we get to do an in person interview with three people who have seen everything when it comes to crypto adoption in the country that I think has adopted crypto the most. The video of this interview cut out halfway through, but nonetheless, the audio is totally fine and the conversation was fantastic. So let's go ahead and get right into the conversation. But first, a moment to talk about some of these fantastic sponsors that make this show possible.

Hola Nasi on Bankless, I'm here.

With three crypto founders in Argentina. And we're here today to explore what crypto looks like in Argentina, because it looks a little different than I think what most people are used to when they think about crypto from crypto Twitter or crypto when they go to some European or American conference. So the three founders that I have here today, first on my left, we got Marcelo Cavazzoli. Marcelo from Lemon Cash. Marcelo, welcome to the podcast.

Thank you, David. It's uh great to be here and I'm super fan of the show.

And in the middle we got Frederico Ogue from Buen Bit. B Frederico, say hi.

Hi everybody, thank you, David, for the invitation.

And then last but not least, uh down at the end of the couch we got Manuel Bedro from Bello. Manuel, welcome to the podcast.

Yeah, thanks for the invite and great to be here also.

So we are in the middle of crecimiento, which is the movement of crypto growth in Argentina, specifically at ALF, which is a one-day pop-up city, the co-working of uh co-working communities right across the street. Uh 62 uh crypto startups are all heads down working along with regulators and just VCs all kind of coming together to promote crypto. And my role here is to tell that story. Uh to also tell the story of crypto in Argentina. Uh and like I said, uh it just looks so different from what I think we are used to in the United States. Uh all three founders here, the companies or respective companies, have millions of users. Uh, and I think that's just a very foreign concept to many crypto companies in America. Like the idea of having a million users is something that we dream about. Not too many crypto companies have a million users. You have Coinbase, all the exchanges, basically, and then after that, it's it's there's not that many that I'm familiar with. Uh and so I the first thing I want to do in this conversation is kind of really explore how big crypto is in Argentina. Because especially with um with your guys as users, your guys' users, I wouldn't call crypto people. They are normal Argentines, well-adjusted adults doing normal things. Uh, and they're not, they're not DJing into tokens. They're not doing any of the stuff that we find on crypto Twitter. Uh, they are just living their normal lives. Uh, and so maybe you guys can we can start like painting a picture of the customer base of you guys' companies. There's some metrics that you might want to share if you can, uh, just to kind of like show how big your guys' customer base is and how big the industry is in Argentina's.

So, well, I I think

it's there's not just one group of people. I think you will discover that there's many different groups and audiences that use crypto

uh for different for different needs.

And I think that in our companies that illustrates a lot because um each of us have like a specific focus

that maybe it's more appealing for for an audience. Um

In my case, in Lemon, we are a wallet that combines crypto and fiat,

and it's mostly focused on the Argentine,

this one that you are describing, right? The the common Argentine that gets paid in pesos and that uses Lemon every day. So it's a the for us, it's a combination of