BCRA bans financial institutions from offering digital asset services to their customers. The regulator wants to safeguard the users and the economy of the country from the risks involved in the operations of virtual assets.
Recently Argentina has been taking small steps toward embracing digital currencies. On April 26, the capital of the country, Buenos Aires announced that its citizens will now be able to pay taxes in cryptocurrency from onwards. Soon after, on May 2, the largest private bank in the country, Banco Galicia announced that it will now enable its users to purchase and trade Bitcoin. Brubank, a domestic digital bank, also followed the footsteps of Galicia this week.
However, the banks received a blow on May 5, when the Central Bank of the Argentine Republic (BCRA) released a note saying that financial institutions are not allowed to serve their customers with digital asset services including cryptocurrency and those that are not regulated by the board.
This is not the first time that the regulators are refusing to agree with the initiation of digital asset services. In May 2021, the BCRA along with National Securities Commission (CNV) published a note called, “Alert from the BCRA and the CNV on the risks and implications of crypto assets.”. In the note, it was mentioned that these assets pose a threat to their “users, investors” and the economic system of the country.
The alert reads, “Crypto assets can be defined as a digital representation of value or rights that are transferred and stored electronically using Distributed Ledger Technology (DLT) or other similar technology. While these technologies could help promote greater financial efficiency and innovation, crypto assets are not legal tender.” Furthermore, both the regulators recognized some of the risks associated with virtual assets and their operations including its high volatility, absence of safeguards, potential frauds, money laundering, less transparency, and cross-border nature.
BCRA says that the step of prohibiting banks to offer these services has been taken to avoid the risks involved in the crypto industry that can affect the users of these services and the “financial system as a whole”. The board also reminds the financial institutions that their services should focus on, “financial investment, production, marketing, consumption of goods and services” that are needed by “domestic demand and export.”
The board also mentions that any medium associated with the operations of virtual currencies should not be established in the country as they may not comply with the existing regulations.