Argentina prevents the arrival of cryptocurrencies in its banking system

That week something unprecedented happened in Argentina: two banks announced that they would start offering the service of buying and selling cryptocurrencies to their clients. The news had an impact for several reasons: first, because of the caliber of the institutions involved; second, because it marked a complete change in the position of traditional banking towards the adoption of Bitcoin and other digital assets, to which it has historically been fiercely opposed; and third, because the furor was short-lived. Barely 48 hours later, the Central Bank of the Argentine Republic (BCRA) banned this activity and everything went back to zero.

However, this has unleashed a very interesting debate in which politics, the country’s socioeconomic situation, inflation, the informal economy, exchange controls, the need for banks to find new financial instruments to attract the public outside of the conventional ones, and the polarization that the news caused between companies, users and developers of the Argentine crypto ecosystem.

But before proceeding to a more detailed analysis on this topic, let’s go to the facts. On Monday, May 2, it was learned that Galicia Bankthe most important private bank in Argentina, incorporated the purchase and sale of cryptocurrencies in its platform of home banking. Thus, its clients could choose between a series of assets such as Bitcoin, Ethereum, USDC and Ripple (XRP), to operate directly from their bank accounts in pesos.

The news was accompanied by brubank, one of the 100% digital banks in Argentina, also added this possibility. Both financial entities they allied themselves with a firm called Lirium for the provision of cryptocurrencies and began operations with a limited number of users. The expectation was to expand the scope of the offer over time, of course.

It is worth mentioning that there was another Argentine bank that recently began experimenting with cryptocurrencies, although its case went practically unnoticed. We talk about Reba (Rebanking, formerly), which also operates entirely digitally.

To the disbelief of many, Argentine banks began to operate with cryptocurrencies

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The news that Banco Galicia and Brubank began to market cryptocurrencies generated surprise in the common people, as well as divided opinions. The crypto environment was somewhat upset about this new option; some of its exponents criticized that the institutions only allowed to buy and sell the assets, and not enter or withdraw them through wallets of third parties.

Others saw the move as a drowning slap by financial entities; or even as a “trick” to control the possible movement of undeclared money before AFIP, the Argentine tax agency, hiding behind the popularity they are gaining among the population

As published The chronicler, 74% of Argentines would be willing to buy crypto assets to use them as a method of saving or investment. This statement should not be taken lightly, but as a clear demonstration that traditional banking instruments are no longer sufficient to attract a public that has historically distrusted these entities. In this sense, the footprint of the Corralito of 2001 has proven to be indelible despite the passage of time.

In addition, with annual inflation forecast above 50% again, not even the high interest rate that banks pay on fixed-term deposits (which today is 46%) serves to satisfy small savers. That is where cryptocurrencies appear as an option to try to make a difference, even despite the recognized volatility of assets such as Bitcoin and Ethereum. The stablecoinsmeanwhile, are the refuge of dollarization for those seeking to evade the iron exchange controls currently imposed.

Damián Di Pace, from the consulting firm Focus Market, recently told The Wall Street Journal that workers prefer a volatile asset to the peso because they know that with the latter “they will always lose.”

Banking, as a gateway to the crypto world

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However, beyond the reluctance and mistrust, there was also a positive view of banking involvement in the crypto world. According to specialists, banks are far from being the ideal solution for the use of cryptocurrencies, but they can play a crucial role in make the experience easier for newer users who still do not know in depth what the technology that powers them is all about.

“Having cryptocurrencies in a exchange or a bank is the most recommended? In general, no, but it depends on who you are, how much capital you have, what for, and how much you know about technology. Beyond that, the CEX [exchanges centralizados] they were, are and will continue to be for a while the biggest gateway to the crypto world,” public Paul Sabbatellafrom DefyEducation; and added: “Believing that the industry is going to grow rapidly in active users based on the current user experience of custodial platforms is not wanting to see reality. exchanges centralized and banks give the new user a simpler and closer experience”.

Nicholas Bournonfrom the team of Muun, an internationally recognized Bitcoin wallet, also spoke along these lines. “Step by step, people, don’t despair. Pick your battles. Just the fact that such a big bank has no choice but to incorporate BTC, ETH, etc., is already a giant step. In the year 2013 this bank [por Galicia] I was denied an account to enable a exchange. So first they ignore you, then they lose.” tweetedand added: “Obviously I will advocate for the self custody and we will not give up, but it is still positive because it gives a huge endorsement to Bitcoin as something that is no longer ‘rare’. In the imagination of the people, it will continue to become naturalized, in order to learn later. […] The more you naturalize, the more normal it is for people to have a fraction, the easier we can explain to you how to have custody. I insist, as a bitcoiner we all have a final goal, but until a few years ago countries, companies and banks ignored you. Not anymore”.

The fury did not last long

As we said at the beginning, the Central Bank of the Argentine Republic He lowered his thumb to the operation with cryptocurrencies in banking institutions just 48 hours after the announcements by Banco Galicia and Brubank. In a circular, the BCRA indicated that it “discourages the offer of crypto assets through the financial system” to “mitigate the risks associated with operations with these assets that they could generate for users of financial services and for the financial system as a whole. “.

This was a bucket of ice water for traditional banking, which was finally encouraged to approach Bitcoin and other cryptocurrencies. As published Infobae, the banks had requested permission from the Central Bank to carry out this operation and had received the go-ahead. The aforementioned report even indicates that they were told that “if it wasn’t forbidden, it was allowed”.

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The truth is that the practice has now been banned and it is unknown what caused the change in position in just a couple of days. However, several hypotheses have been formulated over the hours; the most feasible the impact it could have on the agreement between Argentina and the International Monetary Fund to refinance a debt of 45,000 million dollars. In fact, the technical agreement between the parties includes a paragraph that specifically speaks about the subject. “To better safeguard financial stability, we are taking steps to discourage the use of cryptocurrencies with a view to preventing money laundering, informality, and disintermediation,” the IMF document states.

What will happen to those who have already bought cryptocurrencies through banks? The entities already work for compensate your customers, although it has already been clarified that the volumes operated were low. Banco Galicia, for example, informed its users that they will be able to sell the crypto assets to recover the investment, and will also provide them with compensation.

Traditional banking and crypto will go their separate ways, for now

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The fiasco of the Argentine banks and their first experience with cryptocurrencies reveals the lack of clear rules to operate in the country. Historically, traditional banking has been accused of not innovating, of being archaic, and most of the time it has been rightly so.

Not for nothing did Argentina develop a very healthy ecosystem fintech that set out to provide solutions to the population marginalized by conventional financial entities. Ualá and Mercado Pago are proof of this, and, like it or not, the cryptocurrency exchange platforms too.

Therefore, the twists and turns that the BCRA has given in this story are incomprehensible. For the first time in a long time, banks were preparing to step out of their comfort zone; but everything came to nothing because the monetary authority decided throw it all away overnight. Clearly, this is not the most appropriate way to try to build trust with the public.

At the moment, everything suggests that traditional banking and cryptocurrencies will continue to go their separate ways for a long time. And not for lack of will, but for lack of decision.

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