The Central Bank of the Argentine Republic (BCRA) has put a stop to all digital currency services offered by commercial banks. The BCRA stated that no financial entity in the country may facilitate operations in unregulated digital assets.
The directive is applicable to “crypto assets and those whose yields are determined based on the variations that they register,” the BCRA notice said. The BCRA said the move is to protect the country’s financial system and citizens from the risks that digital currencies pose.
“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 for the financial system as a whole,” the release noted.
Instead of facilitating digital currency transactions, the BCRA advises financial entities to focus on financing investments, production, marketing, and other sectors that promote import and export.
The central bankers also reminded the public of its prior warning on digital currencies released in May 2021. The long list of risks it highlighted includes high volatility, operational disruption and cyberattacks, money laundering/financing of terrorism, as well as capital flight.
Argentina and digital currency adoption
The ban is coming amidst very peculiar circumstances in the country. For one, it is coming just days after two of Argentina’s major banks rolled out digital currency trading services.
This week first saw Banco Galicia announce that they would allow their clients to purchase BTC, ETH, and the stablecoin USDC. Burbank also made a similar announcement shortly after.
Yahoo Finance reports that the banks’ move was motivated by growing demand for digital currencies as more Argentinians seek to hedge against growing inflation. In fact, a survey conducted by Banco Galicia found that 60% of their clients want the digital currency offering.
Marcus Sotiriou, a financial analyst with GlobalBlock, told the publication that the result of the bank’s survey is no surprise as Argentina is one of the countries with the highest adoption rate for digital currencies, the sixth highest precisely.
“Cryptocurrencies can provide a beneficial alternative where the adoption of blockchain networks can determine token values, as opposed to the dramatic loss in purchasing power of the Peso,” Sotiriou said.
Meanwhile, the BCRA clinched a $45 billion bailout agreement with the International Monetary Fund (IMF) in April. The bailout will ensure that Argentina does not default on its debt. However, the IMF’s requirement is that Argentina will discourage the use of digital currencies.
Watch: CoinGeek New York panel, The future of digital asset trading
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