Jun 02, 2021 21:00:00

Why is cryptocurrency mining soaring in Argentina?

The price of Bitcoin, a crypto asset (virtual currency), has skyrocketed from 2020 to 2021, but there are concerns about the impact on the environment because it consumes a large amount of electricity for mining to generate currency, and China

In addition to tightening regulations on mining and trading , Iran has banned mining until September 2021. Argentina is attracting attention as a mining place as virtual currencies are regulated in each country.

Bitcoin mining booms in Argentina thanks to cheap electricity and capital controls | South China Morning Post
https://www.scmp.com/tech/tech-trends/article/3135558/bitcoin-mining-booms-argentina-thanks-cheap-electricity-and

Buenos Aires Times | Crypto mining booms on cheap, subsidized energy in Argentina
https://www.batimes.com.ar/news/economy/crypto-mining-booms-on-cheap-subsidised-energy-in-argentina.phtml

In addition to repeated currency devaluations in Argentina, the economic crisis continues, including defaults, hyperinflation, the epidemic of the new coronavirus infection (COVID-19), and a three-year recession. Not surprisingly, confidence in the Argentine currency, the peso, has been lost and demand for currencies other than the home currency has increased, but capital restrictions in 2019 have restricted foreign currency purchases. Under such circumstances, the existence of virtual currency is attracting attention.

Despite relying on imports for natural gas, Argentina is characterized by very low electricity costs. This is because the measures for politicians to get votes include 'making electricity cheaper' and subsidies are applied to residential electricity. The following is a graph showing 'the ratio of the average electricity rate to the median of the national monthly income', and you can see that Argentina accounts for about 2% of the income. Compared to countries such as Peru, Chile, Brazil and Colombia, the cheapness of electricity in Argentina is obvious.

Due to currency restrictions, pesos can only be exchanged for up to $ 200 a month. For this reason, coupled with the low power consumption, mining of virtual currencies such as Bitcoin is increasing rapidly in Argentina.

Nicholas Bourbon, who has mined in Buenos Aires, said, 'Even after Bitcoin price adjustment, the electricity bill when mining from home was only a small part of the total revenue.' Cryptocurrencies are usually sold at unofficial rates called parallel rates, but the electricity is subsidized, so at the moment it's very profitable. '

Below is a graph showing the changes in the parallel rate (white) and official rate (blue) of Bitcoin. The vertical axis shows the peso price per bitcoin and the horizontal axis shows the passage of time. As of June 2021, the official rate was 3.4 million pesos, but the parallel rate has risen to 5.9 million pesos. You can see that.

Bitfarm, a Canadian mining company, also paid attention to the situation in Argentina and signed a contract with an Argentine power plant to directly access 210 MW of electricity. 'Argentina's economic activity is stagnant and electricity is underutilized. The deal was in favor of both parties,' said Jeffrey Morphy, president of Bitfarm.