The Argentine central bank has barred banks from dealing in unregulated digital assets. Due to the lack of regulation, the move effectively bans all crypto transactions.
The BCRA (Central Bank of the Argentine Republic) has banned banking institutions from delivering unregulated digital asset services. The action comes a month after the IMF authorized a $45 billion loan facility requiring the country to discourage cryptocurrency use.
Argentia Governments Bans Crypto Sales Via Banks
Argentina’s crypto restrictions come as its inflation reaches 20-year highs.
The central bank of the South American country prohibited unregulated digital asset services on Thursday. Since no crypto assets are regulated in the country, the move effectively bans all official crypto transactions.
According to the statement, the measure imposed by the BCRA Board of Directors aims to mitigate the risks associated with activities involving these crypto assets.
A month ago, Argentina agreed to a $45 billion debt restructuring with the IMF to avoid defaulting on its debts. The agreement mandates the country to discourage the use of cryptocurrencies and strengthen its financial system.
According to the letter of intent written to the IMF, “to further safeguard financial stability, we are taking essental steps to discourage the cryptocurrencies use to prevent money laundering, informality, and disintermediation.”
IMF Bailout and the Argentine Government
The raw data suggests Argentina’s crypto ban is more about financial controls than money laundering or terrorism financing.
Money laundering accounted for just 0.05 percent of all crypto transactions in 2021, with roughly $33 billion being laundered since 2017.
The estimates of UN Office on Drugs and Crime suggests that between $800 billion and $2 trillion worth of fiat currency is laundered annually, equaling up to 5% of global GDP.
The raw data suggests Argentina’s crypto ban is more about financial controls than money laundering or terrorism financing.
According to Chainalysis, Argentina had one of the world’s highest crypto adoption rates in 2021. Many Argentinians are flocking to Bitcoin and other crypto-assets as the Peso plummets. A few days back, at a 20-year high in annual inflation, the Peso has lost over 800% of its value versus the US dollar in the last five years.
Despite the BCRA’s ban on traditional financial institutions offering crypto services, Argentina’s residents will likely be able to save their wealth in assets like Bitcoin, Ethereum, and stablecoins.
Argentina Leading Crypto Adoption
Recently, two leading private banks in Argentina, Banco Galicia, and Burbank, announced that they now support crypto transactions.
According to Bloomberg, an Argentine poll found that 60% of respondents wanted more access to crypto, prompting banks to start allowing crypto trading.
Ignacio Carballo, an affiliate at Americas Market Intelligence, confirmed on Tuesday that Banco Galicia now accepts Bitcoin (BTC), USD Coin (USDC), Ether (ETH), and Ripple (XRP) purchases.
.#IMPORTANTE: El Banco Galicia incorpora función de comprar #criptomonedas!
Se transforma así en el PRIMER BANCO DE ARGENTINA en ofrecer el servicio #critpo. Impresionante paso de la Banca Tradicional.
(P.S.: hay que decirlo: chupate esa mandarina!) pic.twitter.com/0Kpi3oMUIL
— Ignacio E. Carballo (@IECarballo) May 2, 2022
South American countries are leading the way in crypto adoption
South America has the world’s sixth-highest crypto adoption rate. Statista estimated that between 2019 and 2021, 21% of Argentines would have used or owned crypto.
It may help Argentines beat the crushing inflation by allowing Argentina to buy Bitcoin and other cryptos through their banks could have helped the country beat inflation. According to Trading Economics, inflation in Argentina had reached 55% in April. Scarcity and decentralization are cited as the major advantages that Bitcoin can hedge.
Last month, the Argentine town of Sorradino bought mining rigs and planned to start earning Bitcoin against inflation. Reportedly, it generated about several hundred dollars a month of income from mining.
Last month, Buenos Aires mayor, Horacio Rodriguez Larreta, announced that the city would start accepting crypto for public financial services. As part of its digital identification platform, the city plans to use blockchain technology. Reportedly, allowing Argentina to buy Bitcoin and other cryptos through their banks could have helped it beat inflation.
