Stablecoins are ‘a better product’ than local currencies in emerging economies, Carrica says

The key barrier to more stablecoin adoption is the user interface, not the value proposition, says Carrica


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Wences Casares, the founder and chairman of Xapo Bank, once said that the United States was the most difficult place in the world to successfully explain the value of Bitcoin. That’s because in the US, money and governments already work reasonably well. People living in unstable economies with widespread corruption, on the other hand, easily grasp its utility.

The same can be said of stablecoins, the co-founder of Mountain Protocol, Martin Carrica says. With inflation rates exceeding 40% per year since 2008, Argentinians are looking for harder currencies, he says, and the default is the American dollar. 

On the Empire podcast (Spotify/Apple), Carrica explains that prior to the existence of cryptocurrency-based stablecoins, secondary markets were the most common way to access dollars. “You have all sorts of ways to arbitrage this market,” he explains. 

“You can buy stocks in New York and then transfer them to Argentina,” for example, or “you can buy casino chips in a casino in Uruguay that has a location in Buenos Aires.”

Stablecoins came in,” Carrica says, “and they offered a better way to access dollars.”

Before stablecoins, Carrica explains, “you would go and buy dollars in person and you would get a piece of paper. Is that dollar fake or not? You don’t know.”

“Sometimes, they will put fake dollars in that transaction and then you try to put them in an ATM in the US and they fail.”

It’s just a better product

Carrica adds that the risks of holding paper money must also be considered. “You put it in a safe in the bank,” he says, hoping it will be secure. 

But in 2001, Carrica explains, the Argentinian government implemented an economic measure commonly referred to as a “corralito” in an effort to halt a bank run, causing cash withdrawals to be limited into “little corrals.” 

“So, the safe in the bank is not safe.” 

“You put it in your home, but someone can break in,” he adds. “You have a lot of custody problems with accessing dollars.”

Stablecoins solve many of the problems that are so common in emerging economies, Carrica says. “A stablecoin is very easy to access. You access it with a local payment network. You buy your dollars. The custody is simpler, and then you can pay other people internationally with it.”

Read more: Could CBDCs, stablecoins shift institutional funding in emerging markets? Panelists weigh in

“It’s just a better product,” he says. “That’s why you’re seeing the explosion of stablecoins.”

The key barrier to the wider usage of stablecoins isn’t therefore the technology’s value proposition, Carrica says. It’s the user experience. “Do I think I’m sophisticated enough to manage that technology or not?” he asks. That’s the big question.”

“It’s the UX. It’s not, do I think this is better than having a dollar in my bank today?”

Currently, most stablecoin users in Argentina access Tether (USDT) via the TRON (TRX) network, thanks to its low fees. “They understood that emerging markets needed something cheaper,” Carrica says. “None of the [layer-2s] today are going after this market.” 

Trading stablecoins for stacks of paper

Carrica describes a typical experience with stablecoin payments in Argentina. “Let’s say you’re a developer in Argentina,” Carrica explains. “You work for a company from Silicon Valley. You get your salary paid in crypto and you need to pay rent.”

“You have a contact,” Carrica says. “You message them through WhatsApp and say, ‘I want to sell a thousand dollars.’”

The contact might send someone on a scooter with a bag full of pesos to make the exchange. “You don’t even count them,” he says, “because it’s so many, you just count how many stacks you have.”

The client can then send USDT to the contact and settle the exchange immediately. “You have your pesos for your rent, for whatever expenses,” he says.

Many merchants will also accept stablecoins, Carrica says, but “you’re not going to see signs everywhere about this because, of course, the government doesn’t want this market to materialize.”

Tourists from neighboring countries like Brazil will often pay with USDT simply because it’s easier than converting their own currencies, he adds, “and they also save on their own taxes from consuming foreign currencies.”

Recalling the financial meltdown of 2001 in Argentina, Carrica fears the same will soon happen again as Argentina’s central bank reserves approach zero. 

“When things are good, you feel like you have a dollar,” he says, “until something happens, and you don’t have a dollar anymore.”

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