The Banco Central De La Republic Argentina (BCRA) has called for a halt to its country’s payment service providers offering crypto transactions. Argentina’s central bank alleges it intends to reduce its payment-system exposure to virtual assets. The decision was made because of the risks associated with digital assets and the potential impact on the country’s financial stability.
On May 4 2023, the monetary authority released a statement stating that payment providers may not offer or facilitate crypto services such as Bitcoin and Ethereum via their applications. They are, moreover, bringing payment fintech and financial institutions under the same laws in Argentina. All payment and electronic money transfer providers administered in the country are included in this decision, even the leading payment app in Argentina, Mercado Pago.
Views on the matter
Camara Argentina Fintech chamber pleaded with the government to reconsider the decision, stating that “it limits access to a technology that offers multiple benefits and opportunities for our society.” On their social media page written in Spanish, CamaraFintechAr posted, “We reject the Com. “A” 7759 of the BCRA, which announces that payment service providers that offer payment accounts (PSPCP) may not carry out or facilitate operations with crypto assets to their clients.” The post received numerous comments with different views on the issue.
Argentina shuts down crypto services offered by payment apps
The central bank of Argentina prohibited payment providers from offering cryptocurrency transactions, citing that it intends to reduce the payment system’s exposure to virtual assets. Argentinian Authorities said, “Payment service providers that offer payments accounts may both carry out or facilitate operations with digital assets, including crypto assets that are not regulated by the competent national authority and authorised by the Central Bank of the Argentine Republic.”
In Argentina, cryptocurrencies are not regulated, meaning all tokens and coins are subject to the decision. The measure’s result on the local crypto business has yet to be discovered. According to local media, payment providers refused to comment on the issue. In the announcement, other reasons were not elaborated by the bank other than to safeguard customers, meaning that crucial platforms, including the Amazon of Latin America and Mercado Libre, will no longer be able to offer crypto purchasing services to Argentinians.
The impact on Argentina’s economy
The move by the central bank of Argentina to freeze payment apps from offering crypto services comes as Argentina’s currency continues to witness rapid debasement. Hyperinflation is driving crypto adoption in Argentina, the third-largest economy in Latin America, according to the developers of https://cryptominded.com/. In April 2023, for the first time in three decades, Argentina surpassed 100%, with Argentina’s peso down over 98% from its all-time high against the US dollar. The price of Bitcoin (BTC) reached a record high in the Argentine peso (ARS) and has been advocated as a saviour for ordinary Argentinians who are being pushed into poverty or cannot save due to the peso’s collapse.
Data from the national statistics office shows that in March 2023, inflation in the country soared by 104.3% annually. Even though crypto is not regulated in the South American country, its popularity is growing vast. According to Chainalysis, Argentina ranked thirteen in its 2022 Global Crypto Adoption and is the fastest-growing cryptocurrency market. Over 30% of consumers in Argentina use stable coins for daily purchases, mainly for small retail transactions under $1,000.
In December 2022, San Luis, an Argentine province, issued its stablecoin pegged to the US dollar, available to all residents and fully collateralised with liquid financial assets. The approved bill authorises the province to administer the stablecoin up to 2% of its annual budget. However, the chain that will be used for transactions must be specified. The bill is called Financial Innovation for Investment and Social Economic Development, which aims to promote development in several sectors in San Luis through blockchain technology, including generating value and improving auditing procedures.
The bill noted, “The San Luis Art Digital Assets will be art collections from the province, giving local artists the opportunity to digitise their work and have it launched in the digital market through an internal web platform for purchase and sale. For the creation of these collections, NFT technology will be used, making this work of digital art unique, granting ownership and authenticity to the artist or holder of the digital asset.”
Although the central bank says the ban aims to minimise the risks associated with using crypto for its residents and intends to reduce the country’s payment system exposure to digital assets, BTC is currently at an all-time high when priced in Argentina’s peso. The rising prevalence of crypto in Argentina corresponds with the ongoing depreciation of the local currency, and it is still unclear how these measures will affect the local crypto industry.
