Latin American crypto revolution on hold as Argentina throws spanner in the works
The Central Bank of Argentina's board of directors issued a notice prohibiting banks from offering cryptocurrency services.
The Central Bank of Argentina issued a release on May 5 detailing plans to “discourage the offer of crypto assets” through its financial system.
The release stated financial service providers are prohibited from offering digital asset services not registered or authorized by the central bank.
“Financial entities may not carry out or facilitate their clients to carry out operations with digital assets, including crypto assets and those whose yields are determined based on the variations that they register, that are not regulated by national authority and authorized by the Bank.“
Recently, Latin America has been the focal point for pro-crypto moves at the governmental level. For example, Brazil tabled draft proposals last month to implement a comprehensive regulatory framework to govern crypto assets.
News of Argentina restricting banks from dealing in crypto is a significant setback for the industry. More so for Argentinians who have turned to cryptocurrencies to deal with sky-high inflation in the country.
Argentina sours on crypto
The country had a somewhat amiable attitude toward digital assets, with no specific regulatory restrictions, previous to the central bank’s notice.
Indeed, cryptocurrency usage has flourished as it offers locals a viable alternative to the volatile peso and the strict capital controls imposed by the government.
Earlier this week, two of Argentina’s largest retail banks, Banco Galicia and BruBank, listed digital assets on their websites. BruBank had enlisted the help of infrastructure provider, Lirium, who offers ‘plug and play’ digital asset solutions.
The CEO of Lirium, Martin Kopacz, said account holders could buy and sell a limited range of cryptocurrencies. But, as a walled garden, users cannot send tokens off the platform.
Nonetheless, this still represents a leap forward for cryptocurrencies in that Argentinians can gain digital asset exposure via established legacy institutions.
However, the win was short-lived, as the CBoA issued its notice restricting banks from offering crypto just two days later.
Central bank seeks to limit capital flight
The central bank’s board of directors imposed the new measures to mitigate risks associated with crypto.
The risks are high volatility, disruptions including cyberattacks, money laundering, terrorist financing, and the absence of safeguards and adequate information. The notice also mentioned the threat of capital flight from the country.
“The different actors involved in the operations with these assets may not be established in the country, which could generate departures from the general regulations.”
In 2021, the regulator imposed strict capital controls that limited foreign exchange to just $200 a month, and exchangers were required to pay two different taxes.