The central bank of the South American country Argentina published a Explanation on Thursday that the country’s financial sector must not provide services related to digital assets, which are not regulated. This effectively bans all crypto transactions within the official economy.
The move comes just days after Banco Galicia and Burbank SAU, the two largest private banks by market value in the Argentine state, announced plans to allow their customers to buy cryptocurrencies (Bitcoin, Ethereum, etc.).
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The country has decided to discourage the use of cryptocurrencies after the International Monetary Fund approved a $45 billion loan.
Banks in Argentina do not offer crypto services
With inflation rates hitting 20-year highs, the country is taking a strong stance on digital assets.
The purpose of banning cryptocurrencies is to mitigate risk and protect their economic system as the country inherently views crypto assets as trustworthy and permissionless. According to the BCRA statement:
The measure, mandated by BCRA’s Board of Directors, aims to mitigate the risks that operating these assets could pose to users of financial services and the financial system at large.
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IMF deal to deter cryptocurrencies
The move comes about a month after the International Monetary Fund announced it would give the country one Loan of $45 billion.
The agreement obliges the country to ban the use of cryptocurrencies to protect its financial sector. That letter of intent provides an overview of Argentina’s commitments under the agreement with the IMF, which states:
To further protect financial stability, we are taking important steps to (i) eliminate the use of cryptocurrencies to prevent money laundering, informality and disintermediation” to strengthen the country’s financial resilience.
The institution (BCRA) said that bitcoin and other cryptocurrencies could be used by criminals for money laundering and terrorist financing. Since they are also considered untraceable, they (criminals or bad actors) can use them extensively in drug deals, gun financing, prostitution, etc.
Chainalysis, a blockchain analytics company, reports that money laundering accounted for just 0.05% of total crypto transaction volume in 2021. This would mean that $33 billion has been laundered since 2017. In comparison, the UN Office on Drugs and Crime estimates that between $800 and $2 trillion is laundered each year in fiat currency, which accounts for about 5% of global GDP.
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That Report 2021 of Chainalysis showed that Argentina ranks 10th with the highest crypto adoption rates in the world.
With this bold move to ban crypto services, the Argentine government is trying to discourage its citizens from storing their money in crypto assets like Bitcoin, Ethereum, and stablecoins because they perceived the digital assets as a threat to their country’s economic system.
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