In Argentina and Turkey, two countries hit hard by soaring prices and tumbling currencies, people are turning to stablecoins to protect their wealth. The shift toward digital tokens comes as residents of these countries might have difficulty getting their hands on physical dollars or other currencies amid tight capital controls.

Turkey and Argentina Have the Highest Ownership Rate of Crypto

According to research from GWI, Turkey has the highest ownership rate of digital currencies worldwide, at 27.1%. Reuters reported Tuesday that Argentina follows closely at 23.5%, well above the average of 11.9% global crypto ownership.

The common factor between the two nations is their high inflation rate. In March, Turkey hit an annual inflation rate of 50.51%, while Argentina surged past that with 104%. Both the lira and peso are at record lows.

Stablecoins, such as USD Coin (USDC) and Tether (USDT), have been an attractive alternative to scarce dollars for citizens of Turkey and Argentina. Stablecoins are digital assets that maintain a peg to traditional assets such as the U.S. dollar or gold, providing stability compared to other cryptocurrencies.

“Folks, whether they’re on the retail side or institutional side, are thinking about how can we hedge against currency devaluation,” Ehab Zaghloul, a research scientist at Tribal Credit, a digital payments platform for startups in emerging markets, told Reuters.

“They want to potentially hold additional assets pegged to a stronger currency, so, things like USDC or USDT or anything pegged to a stronger currency like the U.S. dollar.”

Recently, there was a multi-month high in trading volume for the USDT-Turkish lira pair, driven by the weakening of the Turkish currency and the upcoming elections. This came despite the country announcing additional capital controls to tighten its hold on the Lira.

“In general, crypto adoption tends to be higher in countries with capital restrictions, financial instability, and political instability,” analysts at K33 Research wrote.

Turkey and Argentina Top Global Inflation

Turkey and Argentina have dominated the global inflation league over the past few months with soaring prices and weakening national currencies.

According to the April retail and wholesale price indices published by the Istanbul Chamber of Commerce (ITO) earlier this week, Turkey’s annual inflation rate for the past month is expected to come at 62.46 percent. The price surge comes as Turkish annual inflation fell to 50.51% in March.

Furthermore, the report estimated that retail prices jumped 4.57% month on month in April for an annual rise of 62.46%. The ITO added that wholesale prices in the city jumped 3.14% from March for an annual rise of 70.58%.

Similarly, Argentina’s inflation rate has soared past 100% this year. According to the country’s statistics agency, inflation hit 102.5% in February, suggesting the price of many consumer goods has more than doubled since 2022.

Annual consumer inflation in Argentina jumped to a new record of 104.3% in March. Last Tuesday, the peso plunged another 6.7% to a 490 close last week, its steepest daily drop since November 2020. In a sliding peg to the dollar, the official peso has fallen 20% so far this year.

In Turkey, inflation began to surge in the autumn of 2021, when the lira slumped after the central bank gradually cut its policy rate by 500 basis points to 14%. Since then, the lira’s continued decline, as well as the economic consequences of Russia’s invasion of Ukraine, has led to skyrocketing inflation.

Meanwhile, most economists in Argentina see inflation as being driven by the government’s money printing to finance government deficits, political infighting, and the country’s unprecedented drought.

This article originally appeared on The Tokenist

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