Days after Argentina’s biggest private bank decided to add crypto trading, the central bank announces a ban on digital assets’ transactions in the banking system
Argentina’s central bank has decided to ban unregulated crypto transactions in traditional banks. Once regarded as a crypto-friendly country, the pendulum has swung in Argentina after the International Monetary Fund (IMF) reportedly pressured policymakers. This announcement comes just days after Argentina’s biggest private bank, Banco Galicia, decided to add crypto trading.
“Financial institutions can’t transact or facilitate transactions to their clients in digital assets trading, including crypto assets and those whose income is determined by crypto’s value fluctuation,” the Central Bank of the Republic of Argentina said in a statement published Thursday. This represents an actual ban, because there are currently no regulated digital assets in the country.
The regulator said its actions are designed “to mitigate risks associated with” crypto, both for investors and “the whole financial system.” Argentina’s central bank reckons that banks should focus their efforts on financing the real economy instead of digital assets. Moreover, it implies that these transactions would involve unregulated entities established outside Argentina, which could breach current laws.
The action follows an alert in May 2021, during which authorities highlighted the risks of cryptoassets and advised investors to be “prudent” in their investment decisions. These risks include “high volatility, cyberattacks, money laundering and terrorism financing,” as well as infringements on transnational currency exchange operations, the central bank said.
Last week, Banco Galicia and digital bank Brubank SAU revealed that they were offering digital assets trading services, including mainstream cryptocurrencies such as bitcoin, ether and the USDC stablecoin. Until now, Argentines had to use centralized exchanges through wallets or trade directly through over the counter exchanges.
In 2017, Argentina received a $44 billion bailout from the IMF — the largest-ever relief package. The institution recently approved a debt restructuring deal and, in tandem, both parties agreed that Argentina would “discourage the use of cryptocurrencies with a view to preventing money laundering, informality and disintermediation,” according to a letter of intent sent in March by politicians to the IMF’s managing director, Kristalina Georgieva. The stated goal was to “further safeguard financial stability.”
The country has been grappling with high inflation and the devaluation of its currency, the peso, for years now. Argentina’s monthly inflation rate rose to 6.7% in March alone, surpassing forecasts, according to the country’s latest data. The annualized inflation rate hit 55.1% that month, reaching the highest level in two decades due to increases in food and energy prices.
Locals, in turn, have started investing in crypto to protect their savings from shrinking purchasing power, and employers have been allowed to pay up to 20% of an employee’s salary in cryptocurrencies. However, the latest decision taken by the central bank may reverse the trend towards mainstream crypto adoption in the country.
Source: blockworks