Meme Coin Scandal Dents Popularity of Argentina's Libertarian President Javier Milei

A meme coin scandal and investigation have dented the popularity of Argentina's libertarian President Javier Milei and hindered his efforts to strengthen political alliances

Buenos Aires (Reuters) - A meme coin scandal and investigation have dented the popularity of Argentina's libertarian President Javier Milei and hindered his efforts to strengthen political alliances ahead of congressional midterm elections this year.

Milei, a brash former economist, shot to prominence last year when he promised to take a "chainsaw" to public spending and recently gifted a real one to billionaire Elon Musk.

This month, Milei stirred controversy when he posted on X in support of a new token, Libra. After Milei's post, the token spiked in price as high as $5.

But Libra quickly collapsed to around $1 by mid-afternoon on Wednesday. Milei's post had since disappeared, and critics accused him of a so-called "rug-pull" scam, in which an influential person touts a financial asset for dubious reasons to inflate the price and then sell it.

Milei's government said the president himself was fooled, and he has denied having business links to the cryptocurrency. A federal judge is investigating the token's launch and whether Milei was involved.

Early fixes to Argentina's battered economy came with harsh austerity measures, yet voters appreciated Milei's plain-speaking style and pledges to take down the corrupt "caste" politicians. But the crypto episode has begun to erode that robust support.

"There is something that has been broken in terms of credibility and reliability," said Shila Vilker, director of Buenos Aires-based pollster Trespuntozero, whose data showed 53.1% of Argentines did not trust Milei over the scandal.

Both Trespuntozero's poll and another by Giacobbe & Asociados showed Milei's positive image only edged down slightly after the scandal. Yet the Giacobbe & Asociados poll indicated 46.6% of respondents held a negative view of the president, up sharply from 36.2%.

That raises concern in an election year as Milei seeks to bolster his relatively weak position in Congress by building bridges with more mainstream conservative allies and bringing more lawmakers into his libertarian party.

"The Libra case has started to hurt his voter base," said Vilker, handing an issue to the left-leaning opposition. "It's the bullet or the ammo that the opposition needed."

MILEI THE ANTI-POLITICIAN

Meme coins are new crypto tokens that piggyback on popular internet trends or people. They often post staggering rises in price before suddenly collapsing, leaving a few early buyers with spectacular gains but many more losers.

Famous meme coins include the dog-themed Dogecoin, which soared when Musk began tweeting about it in 2020. Trump and his wife released cryptocurrencies named after themselves days before his January inauguration.

Milei's post to his 3.8 million followers on X helped boost Libra before the meme coin collapsed. His government claims he was duped and did not personally benefit.

"If there is someone who has been scammed, it is Milei," a government source close to the president told Reuters.

Marina Acosta, director of communications at local consultancy Analogías, said the issue for Milei was with middle-ground voters who generally supported the government but only felt a "weak" connection with Milei's party and ideology.

"Many people no longer believe that Milei is different, but rather that he's part of the political 'caste' himself," teacher Silvia Sarabia, 54, told Reuters, referring to the label the president often pins on traditional politicians.

The government source said Milei's La Libertad Avanza had become the main right-wing bloc, taking over the mantle from the center-right PRO, which remains an important yet uneasy ally for Milei in Congress.

"We are the right-wing party, and those who want to (join us) are welcome," the government source said.

The main Peronist opposition looking to dent Milei's momentum is divided. The Peronist governor of Buenos Aires province Axel Kicillof this month launched his own political bloc, signaling a further split.

"We have no other option than to go united; if not, they (the government) will bulldoze us," a Peronist source said. "However, if La Libertad Avanza and PRO are split in Buenos Aires province and city, we have a chance of winning."