Cryptogate Shatters Milei's Strategy and Credibility

Cryptocurrency Controversy

Argentine President Javier Milei recently experienced, just a few days apart, both political success and discredit. While the country reached the lowest monthly inflation index in the last 5 years (2,2%), reinforcing the idea of an Argentine takeoff, a tactical error by Milei himself overshadowed the good news: He promoted a cryptocurrency named $Libra via X, only to later withdraw his support, causing capital losses for 40,000 investors in this digital asset.

The situation caused a local political earthquake whose aftershocks extend beyond its own borders. Now, the Argentine leader faces simultaneous requests for investigation from the local opposition and complaints of fraud filed from the United States. Additionally Milei’s recent television interview with local media outlet TN, didn’t help to reduce the wide range of questions by public opinion both in the media and online.

This seems to be the first high impact crisis for the libertarian administration, a relatively new government that had so far managed to overcome all difficulties. The outcome might be enough to teach Milei the rules to the political game he has scorned for so long.

The Iron Triangle

If there is something that Milei and his cabinet have managed to strengthen since coming to power it is their political strategy. The president, his sister Karina Milei, and his advisor Santiago Caputo form a strong team of close political collaborators known as the 'iron triangle.' Indeed, the government's success also rests on three sturdy legs: Strong control of government communication, strong results in economic matters, and strong consolidation of the presidential figure.

Until now, neither the pressure of a disintegrated opposition nor the application of the chainsaw in sensitive areas for the population such as public health and education, nor even the well-known verbiage (some would say not just politically incorrect, but sometimes even aggressive) of Milei had managed to pierce this strategy. Even the economic objectives and necessary political agreements had turned out in their favor without major complications or unprecedented delays.

But the $Libra scandal, although it seems weakly contained by the presidential team, has threatened two of the three aspects of Milei's master plan: his image and his public communication.

Investor Fallout

Milei’s X post about the $LIBRA cryptocurrency was posted on his profile last Friday for about five hours. The fact that a presidential figure had promoted a private initiative project was the cause of a great deal of speculation, which forced the Argentine leader to delete the original post to express in another message that he was not familiar with the details of the business. This was followed by an instant depreciation of the asset, millions of losses for investors, scam speculation, a flood of criticism and radio silence from the government over the weekend.

Timing in politics is a powerful asset, though any opportunity to gain an advantage was lost. During that weekend, the government did not issue any official communication, formal explanation or public apology through any of the usual channels regarding the cryptocurrency case By silencing its powerful communication engine, it only raised more questions. A subsequently interview broadcast on Monday was perceived as elusive and dismissive.

This is not the first time that the Argentine president has unleashed public outrage. But unlike in previous cases, on this occasion his over-the-top communicative style and voracity for responding to criticism backfired and forced him to stay in silence at least for a weekend. That’s the real news.

Milei’s other great strength is his image: the passionate economist, skeptical of traditional politics, a man of the people with crystal clear motivations for his country. Right now, after the cryptogate scandal, his figure, credibility and skills to respond to the situation have attracted scrutiny not only in Argentina, but among other world leaders.

Balance Needed

The image of a strong, determined and heroic Milei begins to show some worrying cracks. While promising economic results in terms of inflation, economic reactivation and exchange stability continue to be applauded, this is increasingly seen as a secondary discussion.

The three legs of the President’s platform are failing to provide him with the stability he needs. Perhaps for now he can hope for nothing better than a fourth, which guarantees balance and continuity to his project. But in that case, the additional support must come through precisely the political sensitivity and skill that Javier Milei disdains so much.

Agustina Sosa

Argentine Journalist | International Relations Specialist