Crypto Analytics

Central Bank of Argentina Bans Crypto Trading

  • Unregulated Crypto Trading Is a Risk to Investors and the Financial System, Central Bank Says
  • Pressure from the IMF following a recent debt restructuring may have played a role in this decision

The Central Bank of Argentina has decided to ban unregulated crypto transactions in traditional banks. Once seen 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 largest private bank, Banco Galicia, decided to add crypto trading.

“Financial institutions cannot settle or facilitate transactions with their customers in the trading of digital assets, including crypto assets and those whose income is determined by the fluctuation in value of crypto,” the Central Bank of the Republic of Argentina said in a statement published Thursday. This represents an actual ban as there are currently no regulated digital assets in the country.

The regulator said its actions are designed to “mitigate the risks associated with crypto for both investors and the broader financial system.” Argentina’s central bank says banks should focus their efforts on funding the real economy, rather than digital assets. Furthermore, it implies that these transactions would involve unregulated companies based outside of Argentina, which could “break” applicable laws.

The action follows a May 2021 warning in which authorities highlighted the risks of crypto assets and advised investors to be “prudent” in their investment decisions. Those risks include “high volatility, cyberattacks, money laundering and terrorist financing” and violations of transnational foreign exchange operations, according to the central bank.

Last week, Banco Galicia and digital bank Brubank SAU announced they were offering trading services for digital assets, including mainstream cryptocurrencies like bitcoin, ether, and stablecoin USDC. Previously, 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 bailout ever. The institution recently approved a debt restructuring agreement, and both parties jointly agreed that Argentina “will discourage the use of cryptocurrencies to prevent money laundering, informality and disintermediation,” according to a statement of intent sent in March by politicians to the executive Director of the IMF, Kristalina Georgieva. The declared goal was to “continue to secure financial stability”.

The country has been struggling with high inflation and the devaluation of its currency, the peso, for years. Argentina’s monthly inflation rate rose to 6.7% in March alone, beating forecasts. according to the latest data of the country. Annualized inflation hit 55.1% this month, hitting its highest level in two decades on the back of higher food and energy prices.

Locals, in turn, have started investing in crypto to protect their savings from shrinking purchasing power, and employers are allowed to pay out up to 20% of an employee’s salary in cryptocurrencies. However, the recent central bank decision could reverse the trend towards mainstream crypto adoption in the country.

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The post “Argentina’s Central Bank Bans Crypto Trading” is not financial advice.

Source: Crypto News Austria

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