The Brazilian government refuses to use Bitcoin reserves due to volatility concerns; Argentina catapults into the lead of the crypto race in Latin America with blockchain tokenization.
Recently, the idea of a national Bitcoin reserve was discussed at a historic public hearing in Brazil. Brazil rejects Bitcoin as a reserve asset over volatility and regulatory risks, even though it was initially excited.
In the meantime, Argentina is hastening its tokenization by adopting blockchain technology to digitalize its economy.
Why Brazil Said No: Unpacking the Bitcoin Reserve Debate
On August 20, a bill was under consideration by the Economic Development Committee of Brazil that would see the national treasury allocate up to 5 percent of reserves in Bitcoin.
Diego Kolling of Meiliuz compared Bitcoin to gunpowder, a defensive mechanism that was once embraced all over the world.
However, there were warnings by the Ministry of Finance and the Central Bank. According to Daniel Leal, of the Ministry of Finance, the main role of reserves is to provide liquidity and security.
He cautioned that the volatility of Bitcoin prices runs contrary to these requirements. Brazil’s National Bank’s L.G.Siciliano observed that the International Monetary Fund (IMF) classified Bitcoin as a non-financial asset.
He further noted that Bitcoin is not supported by liabilities and is not a foreign currency, which are major requirements of reserve assets. His analysis indicated that even a small increase in allocation to 5 percent increases the risk of a portfolio.
In spite of these fears, Pedro Guerra, the Chief of Staff to the Vice President of Brazil, recommended further research on the role of Bitcoin. He held that Bitcoin is a revolution in the field of public finances and can make Brazil a strategic leader.
The bill is currently awaiting committee consideration, senatorial action, and presidential signature. The controversial economic discussion that this hearing generated reflects the complex balancing of innovation and stability in Brazil.
Argentina is leaping blockchain: Tokenization is in the Spotlight
At a time when Brazil is still undecided, Argentina is the first to use blockchain technology to benefit its economy. The nation is at the forefront in promoting tokenization to improve transparency and eliminate friction in the financial circles.
The adoption of digital tokens in Argentina can be related to its quest to find alternatives due to inflation and economic instability. Argentina is also looking to achieve some liquidity and investment by converting assets to tokens.
This opposition between the conservative approach adopted by Brazil and the adventurous move of Argentina shows the difference in the crypto pathway in Latin America.
Argentina is seeking to become a laboratory of blockchain innovation to which other countries might soon follow.
