The South American country Argentina’s central bank released a statement on Thursday saying that the country’s financial sector is not allowed to provide services related to digital assets that are not regulated. This effectively bans any crypto transactions within the official economy.
The move is just days after Banco Galicia and Burbank SAU, the two largest private banks by market value in the Argentinian state announced letting their customers purchase 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 Not Offering Crypto Services
As inflation rates hit 20-year highs, the country takes a strong stand against digital assets.
The purpose of banning cryptocurrencies is to mitigate the risk and safeguard their economic system because the country takes crypto assets as trustless and permissionless by nature. According to the BCRA statement:
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 the financial system as a whole.
Bitcoin trading below $36,000 with 5% decline | Source: BTC/USD chart from Tradingview.com
IMF Agreement On Discouraging Cryptocurrencies
The move comes about a month after the International Monetary Fund said that it would give the country a loan of $45 billion.
The agreement requires the country to discourage the use of cryptocurrencies in order to protect its financial sector. The letter of intent contains an outline of Argentina’s commitments to the deal addressed with IMF, stating:
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,” to strengthen the country’s financial resilience.
The institution (BCRA) expressed that Bitcoin and other cryptocurrencies could be used by criminals for money laundering and terrorist financing. Also, as they are consider untraceable, thus they (criminals or bad actors) can widely use them in drug deals, weapon financing, prostitution, etc.
However, Chainalysis, a blockchain analysis firm, reports that money laundering accounted for just 0.05% of all crypto transaction volume in 2021. This would mean that $33 billion has been laundered since 2017. In comparison, the UN Office of Drugs and Crime estimates that $800 billion to $2 trillion is laundered each year using fiat currency, which is about 5% of global GDP.
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The report of 2021 of Chainalysis showed that Argentina ranked number 10 with the highest crypto adoption rates in the world.
With this bold step of banning crypto services, Argentina’s government is trying to keep their citizens far from storing their money in crypto assets like Bitcoin, Ethereum, and stablecoins because they found the digital assets a threat to their country’s economic system.
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Author: Naveed Iqbal