First Contact with Reality (Part Two of Can I Pay With This?)

This is Part Two of the eight-part series: Can I Pay With This? A stablecoin experiment in Buenos Aires

Part One: Decentralized or Destitute
Money, monkeys and mild terror

Part Two: First Contact with Reality <– you are here
KYC on a hostel bunk bed

I arrive in Buenos Aires and immediately discover that Twitter has lied to me. Various digital nomads had insisted that there was no need for cash in Buenos Aires anymore. Don't bother bringing dollars or euros.

It is true that Argentina is currently in a period of relative exchange stability after years of crippling inflation (for ex, 211% in 2023). Using a foreign credit or debit card then meant you'd get the terrible Official Rate. In reality, everyone used the black market Blue Rate which at times could give you almost double as many pesos for your dollars. But now that the two rates have converged, the Twitterati explained, it is safe to use your cards again.

I believed them. Now I have regrets.

The taxi app crashes; the driver is happy to take me anyway for the original amount or even a discount, but he will only accept pesos in cash. My hostel wants a cash deposit for the towel. The first coffee shop I walk into has a big sign: We do not take cards. The man at the subway won't let me top up my newly acquired SUBTE card unless I handed over cash pesos. Not to mention restaurants offering discounts ranging from 10% to an eyewatering 25% just for paying with actual paper money. And let's not talk about the obvious scowls if I even think about tipping my server using my card.

I need to find out how to get cash, fast.

The hostel owner gives the same lecture to every new arrival. Yes, you can get pesos on the black market. However, here are the neighbourhoods that you must not enter if you value your life. Keep your money in your pocket whenever you are outside. Don't take selfies unless you want to lose your phone.

He shrugs confusedly when I ask if I can trade stablecoins for pesos. I need dollars, he tells me.

Once he's convinced that I'm taking him seriously, he gives me directions to a man in a jewelry shop whom he trusts, who will buy my Euros. Don't trade with anyone outside on the street, he tells me. It's dangerous. I can pay the towel deposit later, don't worry. Just be safe! Don't trade on the street.

The streets in question, Calles Lavalle and Florida, are full of men and women calling cambio, cambio, cambio de dolares! every few meters. Mindful of the hostel advice, I ignore them and walk to the jewelry store. A man outside asks if I want to trade and waves me into the tiny shop with an old man sitting with a large cash register. Watches of various values are laid out on the counter.

When I ask if they take stablecoins, he actually laughs. I try again: What about debit cards? Only if I wanted to buy a watch.

I trade 50 euro for many tens of thousands of pesos. I feel conspicuous carrying this much cash, unsafe. I try not to look vulnerable.

I'm crossing a road when a guy walking towards me passes too closely, brushing my shoulder. There was plenty of room and no reason for it. I turn to see who bumped into me and discover he's turned too, standing a few meters behind me, staring at me. As our eyes lock, he turns again and walks away.

That evening, another resident tells me that he didn't bother with the owner's instructions. It was easy to get pesos, he says. "I just walked up to some guy on the street and handed him $500."

Peer to peer, yes. But I think I'm not that brave.

I unpack my three T-shirts and two Android phones and a tablet and a keyboard for the tablet and another travel keyboard, a cute little pink thing that folds up, which I keep in the back pocket of my hoodie, so it is easy access to pull out and use with my phone in coffee shops.

The next assignment: wrestle with a pile of Argentine Web3 apps promoted by Devconnect to showcase Argentine innovation.

They aren't wrong. Argentina is certainly punching above its weight when it comes to Web3 development. There's an almost romantic backstory there, going back to innovation hubs like Casa Voltaire (2014-2016) which led to actual, very-real projects such as Decentraland and OpenZeppelin. Today, Argentina ranks second in Latin America for Web3 developers, despite having only a fraction of the population of Brazil or Mexico. Grassroots communities such as Ethereum Argentina and Crecimiento are dedicated to transforming the country into LATAM's crypto capital.

But when I download the apps, I discover that they are not for meant for me.

Lemon Cash and Belo require a national identity number from a South American country. Ripio lists six countries, including Mexico and – unexpectedly – USA residents and non-residents. As a non-resident of the USA, I start filling in their form, which happily accepts my Euro-credentials and then asks me to upload a copy of my W8BEN, which is essentially the IRS asking you to declare that you are not an American, so they can find some other way to punish you. I back out quietly and delete the app.

The tablet's keyboard fails on the first day, the bluetooth connection hiccupping and disconnecting. The smaller pink keyboard will work for both phone and tablet, however, and I feel smug that I have built-in redundancy. I get back to work with barely a hitch.

I see someone talking about payment solutions on the DevConnect Telegram channel. A new batch of Web3 apps with an elegant premise: use a stablecoin wallet to pay merchants who use the QR-code system in Argentina. Grocery stores, pharmacies and little kiosks that sell novelty mate mugs all accept QR payments, in a system regulated by the Central Bank of Argentina under the Tranferencias 3.0 initiative. It's not quite escaping traditional finance, but the initiative requires that all payment service providers and banks use the same standardized QR code generator. The Web3 apps plug into the QR scaffolding that already exists, allowing me to hold stablecoins (USDC or USDT, depending on the app) and spend in pesos.

KYC is required to comply with local regulations. I quickly try Peanut and Yodl, which both offer QR payments for Argentina and Brazil, Yodl also works in Vietnam and the Philippines. To my surprise, the Know Your Customer (KYC) isn't completely soul-crushing. I enter my address, upload my passport screenshot and minutes later I can move money into my wallet using one of a number of Ethereum Layer 2s designed to make transactions faster and cheaper. Both use Arbitrum, which is a relief. Peanut wants USDC, Yodl wants USDT .

This isn't to say that I was happy with KYC as a part of my solution. This is the requirement to collect personal identifying data to ensure that you, as a provider, can prove that you "know your customer". KYC regulations require that financial applications collect information about their users in order to reduce money laundering and financial fraud, despite billions poured into compliance yearly with little noticeable impact, if any.

An additional catch is that many applications use KYC as an excuse to collect additional data or to filter out customers that they don't like. KYC info is often used as an anti-sybil measure. Ether.fi rejected me because I live in a country that they don't want to deal with. And I'm still feeling salty about going through KYC with Monerium when it was in beta, who then informed me that I couldn't have an account because I wasn't notable enough. I am apparently too boring for the future of finance.

But also… this KYC is easy for me because I'm exactly who financial systems want to offer accounts to. I have a passport from a country that matters, my name linked to an address that exists on official forms, documentation proving I am who I claim to be. I thought that part of the point of alternative finance was to help those people that banks won't or can't serve.

Meanwhile, I'm sitting cross-legged on a hostel bunk, surrounded by charging cables, relying on the hostel's Wi-Fi signal remaining strong enough to upload another photograph of my passport. The future of finance still seems to require centralized government approval.

Another issue: So far, everything I've looked at makes me transfer my money from my wallet to theirs. I instinctively want to say that they are custodial. But no: the apps all say that they are self-custodial, which is confusing the hell out of me. I can't link my own wallet. I have to send funds from my wallet to a wallet in their app. How is that self-custody?

Peanut uses passkeys, saved with Apple or Google, rather than trusting me to store my own details. There is no way to gain control of the wallet they create on my behalf. Their docs insist that it is self-custodial because they don't actually hold the funds and can't spend them on my behalf. I can kinda see the argument, if what they mean is that thewallet is not custodial. But I don't think "we can't spend your money for you" is what self-custody means.

Yodl seems better in this regard: they generate an embedded wallet using Privy and apparently it is possible to gain control of the wallet by bypassing Yodl and using Privy options to export your keys. I have no idea how to do this and I had to wade through their terms and conditions to even find that information.

Neither app has any option for exporting the wallet or any option at all, other than to submit a transaction to withdraw the funds to another wallet. There are no details on recovery. As of right now, if they disappear overnight, so does my money.

On the other hand, I understand that they want to make their apps straight-forward. I appreciate that these middlemen are the only reason that I can buy empanadas without explaining smart contracts to a bakery. They are connecting Web3 to meatspace by plugging into an existing QR system, which is truly useful. I distinctly feel that they don't want to be gatekeepers, they want to be guides.

But it doesn't feel right. I'm learning that sometimes words in DeFi don't mean what I think they mean.

I consider renaming my challenge. Decentralized-ish with bonus Customer Support or Destitute except for a wallet full of cash and three cards .

—

Can I Pay With This?

Table of Contents

Part 1: Decentralized or Destitute
Money, monkeys and mild terror

Part 2: First Contact with Reality <– you are here
KYC on a hostel bunk bed

Next up: WE ACCEPT BITCOIN (sort of)