Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Argentina’s libertarian president Javier Milei has been buffeted by a scandal over his promotion of a memecoin that soared in value before collapsing, triggering impeachment calls and lawsuits.
Milei promoted a cryptocurrency called $LIBRA on X on Friday night, which had begun trading minutes earlier. Its value quickly soared above $4 before falling below 50 cents.
Buyers accused the coin’s creators of a possible “rug pull” scheme, where the cryptocurrency’s initial investors lure in others to inflate its price before quickly withdrawing their funds.
Political opponents have filed dozens of lawsuits accusing Milei of ethics violations, while the main leftwing Peronist opposition bloc said it would launch impeachment proceedings and accused him of “participation in a crypto fraud”.
In a television interview on Monday, Milei said the scandal, which analysts said was the biggest crisis for his administration since he took office in December 2023, was a “slap in the face”.
“I’m a techno-optimist . . . and this was proposed to me as an instrument to help fund Argentine projects,” he said. “It’s true that in trying to help out those Argentines, I took a slap in the face.”
Milei’s office said that the president had twice met representatives of the companies involved in the coin’s creation but “was not involved at any point” in its development.
The president had asked the executive branch’s anti-corruption office to investigate if there was any wrongdoing by himself or any government actor, it added.
“The most interesting lesson is that . . . I need to put up more filters, it can’t be so easy for people to reach me,” Milei said in the interview.
Analysts said the episode risked undermining trust in Milei, a former private sector economist. He has tamed Argentina’s inflation crisis through a sweeping austerity programme and forged high-profile alliances with tech leaders in Argentina and the US.
“In the medium to long term this is going to stain the president’s credibility, [even if] it was an [honest] mistake, given that he brags about his abilities as an economist,” said Marcelo García, Americas director at consultancy Horizon Engage.
“For foreign investors this will feed doubts that already existed about the government’s political capacity and raise fears that unforced errors can jeopardise his reform programme,” he said.
Argentina’s stock market fell more than 5 per cent on Monday, while the peso ticked down 2 per cent against the dollar on a crucial parallel exchange market.
Few Argentines were financially affected by the coin’s crash, with the country’s fintech chamber saying analysis of X posts suggested most $LIBRA buyers were in the US and Asia. They added that the coin had never been listed on the exchanges used by the “vast majority” of Argentine crypto users.
Milei’s opponents appear unlikely to secure the two-thirds majority needed in congress to impeach the president, with centrist blocs saying they would not support the proposal.
The mainstream rightwing PRO, an ally of Milei’s upstart La Libertad Avanza coalition, said the episode was “serious” because it involved “the country’s credibility . . . and the president’s entourage” but accused leftwing leaders of “political opportunism” in calling for his ousting.
But analysts said investigations into the president could nonetheless weigh on his approval ratings, which have hovered at about 50 per cent over the past year, as Argentina gears up for legislative elections in October.
Juan Cruz Díaz, managing director at the Cefeidas Group, a consultancy in Buenos Aires, said the scandal threatened to weaken the minority government’s negotiating position in congress, where it is attempting to pass an electoral reform bill.
“It’s the first significant crisis the government has faced,” he said. “It has room to manoeuvre [but] it will be crucial how it manages the situation in the coming days and weeks.”
Read the full article here
