The Central Bank of the Argentine Republic (BCRA) has banned financial institutions from offering unregulated digital assets services. The move comes roughly a month after the International Monetary Fund approved a $45 billion loan facility that required the country to discourage the use of cryptocurrencies.
Argentina Bans Banks from Offering Crypto Services
Argentina is taking a bold stance against crypto as inflation rates hit 20-year highs.
In a Thursday statement, the South American country’s central bank banned its financial sector from providing unregulated digital assets services. Since no crypto assets are regulated in the country, the move effectively amounts to a blanket ban on crypto transactions within the official economy.
“The measure ordered by the Board of Directors of the BCRA seeks to mitigate the risks associated with operations with these assets that could be generated for users of financial services and for the financial system as a whole,” the statement read.
The move comes roughly a month after Argentina signed a $45 billion debt restructuring deal with the International Monetary Fund to help the country avoid defaulting on its debts. The agreement included a provision that requires the country to discourage the use of cryptocurrencies in hopes of making its financial sector more resilient. “To further safeguard financial stability, we are taking important steps to (i) discourage the use of crypto-currencies with a view to preventing money laundering, informality and disintermediation,” stated the letter of intent outlining Argentina’s commitments to the deal addressed to the IMF.
In January, the IMF pulled a similar trick with El Salvador, ordering it to “narrow the scope of the Bitcoin law by removing Bitcoin’s legal tender status.” Unlike Argentina, El Salvador, which was also negotiating a loan deal with the IMF, firmly rejected the fund’s conditions. El Salvador’s Treasury Minister Alejandro Zelaya responded to the IMF’s request by stating that “no international organization is going to make us do anything, anything at all.”
The raw data shows that Argentina’s move to discourage crypto usage potentially has more to do with capital controls than fighting money laundering or terrorist financing. According to a report from blockchain analysis firm Chainalysis, money laundering accounted for just 0.05% of all crypto transaction volume in 2021, with roughly $33 billion laundered since 2017. In comparison, the UN Office of Drugs and Crime estimates that approximately $800 billion to $2 trillion of fiat currency is laundered each year, equating to as much as 5% of global GDP.
A 2021 report on global crypto adoption from Chainalysis showed that Argentina has one of the highest crypto adoption rates in the world. That’s mainly because many Argentinians have flocked to assets like Bitcoin while the peso’s value tumbles. In the last five years alone, the peso has devalued almost 800% against the U.S. dollar, while Argentina’s annual inflation rate recently hit a 20-year high of 55.1%.
Although the BCRA has blocked traditional finance institutions from offering crypto services, due to cryptocurrency technology’s trustless and permissionless nature, Argentina will likely have a much harder time stopping citizens from storing their wealth in assets like Bitcoin, Ethereum, and stablecoins.