The central bank of Argentina has banned financial institutions from offering any services involving cryptocurrencies like bitcoin.
- The ban comes days after the largest private bank in Argentina announced it would begin offering such services to its clients.
- An alert released from the central bank last year showed its reluctance to use cryptocurrencies, also exhibited in today’s ban.
The Central Bank of the Argentine Republic (BCRA) announced on Thursday’s statement that financial institutions in the country are banned from offering clients any services involving Bitcoin or other cryptocurrencies.
This is heavily connected to the fact that Argentinean senators just approved a $45 billion bailout deal with the International Monetary Fund (IMF) on Thursday that will help the country avoid an imminent default on its debts.
But that’s not the unusual part of the agreement.
The deal, which was approved in a 56 to 13 vote, includes a wild provision that will force the government of President Alberto Fernández to take a tough anti-cryptocurrency stance.
The clause was included in a letter of intent signed by Economy Minister Martín Guzmán and central bank president Miguel Pesce on March 3. It detailed Argentina’s efforts “to discourage the use of cryptocurrencies with a view to preventing money laundering, informality, and disintermediation” in order to “to further safeguard financial stability.”
Argentina’s anti–money laundering regulator, the Unidad de Información Financiera (UFI) or Financial Information Unit, is taking action as a result, working to add cryptocurrency service providers to its list of entities subject to reporting customer transactions, the *Buenos Aires Times* reported this week.
The deal still needs to be approved by the IMF’s executive board, but if it goes through, Argentina will have secured a payment-postponing grace period through 2026 and will immediately receive roughly $9.8 billion in the country’s 22nd agreement with the fund.
That’s good news because Argentina was staring down a $2.8 billion payment due to the IMF by March 22, and a total of $39 billion in debt payments through 2023.
Argentina saw its annual inflation rate rise to a whopping 52.3% in February, and banks including JPMorgan Chase are forecasting consumer prices will increase more than 60% in 2022 as global commodity inflation hits home.
Days ago, the largest private bank in Argentina announced they would begin offering these very same products. Burbank, a digital bank in the country, also announced it would offer a line of support for bitcoin and other cryptocurrencies.
The shock of this decision from centralized authorities directly refutes the actions of many Argentinians as the country is reportedly ranked tenth in the world for cryptocurrency adoption, according to a report from chain analytics company Chainalysis.
The ongoing adoption of bitcoin and other cryptocurrencies within Argentina is largely attributed to the towering rates of inflation suffered by citizens. Reuters reported that the inflation data provided by the government last month showed annual inflation rates of 55% for the month. The report also states experts are anticipating 60% inflation for the year, which is set to take a toll on the almost 40% of the population reportedly living below poverty line.
BCRA released an alert last year concerning the use of cryptocurrencies and the risks it saw associated with participating in the asset class, including high volatility, money laundering, financing of terrorism and potential non-compliance with foreign exchange regulations.
While many Argentinean senators applauded the move to secure financing, some have decried the economic strings attached. The IMF deal will not only require a tough stance on cryptocurrencies, but will also force a reduction in government deficits, an increase in interest rates, and significant cuts to energy subsidies.
Vice President Cristina Fernández de Kirchner and a left-wing coalition of senators published a letter titled “Los Muertos no pagan las deudas” or “the dead don’t pay their debts” in a sharp rebuke against the deal on Thursday.
Argentina’s rising inflation rate hasn’t only caused the country to seek financing from the IMF, it’s also led to a surge in users for crypto firms in the nation as consumers look to protect their pay checks. Two of the top crypto exchanges in the country, Lemon Cash and Ripio, boast millions of active users and have recently expanded their offerings of crypto credit cards that offer cash back in Bitcoin.