Argentinian Locals Seek Refuge in ‘Crypto Caves’ Amidst Inflation, Bitcoin Shunned

Argentines are turning to underground black market exchanges, known as “crypto caves,” to purchase stablecoins tied to the United States dollar as a way to bypass strict currency controls and the high inflation of the Argentine peso. These crypto caves are hidden and operated in secret locations where individuals can exchange their local currency for cryptocurrencies, mainly USDT, at more favorable rates than the official exchange rate. Due to government restrictions, local banks cannot accept US dollars, so many Argentines are using crypto wallets to store dollar-pegged stablecoins, which allows them to save their money as the local currency continues to depreciate.

The concept of crypto caves originated from “financial caves,” which were public money exchanges that went into hiding when Argentina implemented currency controls in the 1980s. This led to the creation of the “blue dollar,” an unofficial and informal exchange rate, which currently offers locals 1,115 pesos for $1. Under the presidency of economist Javier Milei, the official exchange rate has increased from 365 pesos to 829 pesos against the dollar. Argentina has experienced a 32-year high inflation rate of 211.4% in 2023.

While some crypto caves have faced investigations and raids by authorities, they are still viewed as a necessary alternative by locals to trade their inflation-ridden pesos. The expectation is that these currency controls may be lifted under Milei’s leadership, which could decrease the demand for crypto caves as access to official channels becomes available. The high tax burden in Argentina may continue to drive the existence of a “black market” that prefers to operate under the radar.

Crypto caves are not exclusive to Argentina. They also exist in other countries like Cuba, Venezuela, Iran, and several African nations. In Argentina, despite the recent legalization of Bitcoin as a payment method for contracts, many Argentines are avoiding Bitcoin due to its perceived volatility. Business experts argue that conducting contracts in Bitcoin adds an additional layer of uncertainty given the country’s high inflation environment. Instead, locals prefer using stablecoins like USDT on the Tron network due to their speed of accreditation, accessibility, and fixed 1:1 parity with the US dollar, which eliminates the need for frequent conversions.