Argentina prohibits banks from operating with cryptocurrencies

  • Two banks in Argentina started selling four cryptocurrencies: Bitcoin, Ether, USD Coin and Ripple.
  • Less than two days later, the country’s Central Bank canceled the sale and warned that it is an illegal operation.
  • The banks returned the assets.

Two banks in Argentina had started the sale of cryptocurrencies through their web applications. However, less than 48 hours after the launch, the Central Bank of the Argentine Republic (BCRA) issued a statement warning that it was a prohibited operation and ordered the entities to cancel it.

That’s right, the BCRA, through a public communication, decided to prohibit the marketing of digital assets, including Bitcoin and Ether, after Banco Galicia and Brubank advanced in May in that regard. Apparently, without the endorsement of the monetary authority.

The BCRA prohibited the sale of cryptocurrencies even though in a previous meeting of its board of directors it had resolved that operations of these characteristics were not against the regulations.

The National Securities Commission (CNV) of Argentina, in parallel, is analyzing a similar measure to prevent the sale of crypto through brokerage firms.

“Banks and other organizations linked to finance cannot carry out or facilitate their clients any operation with digital assets, including crypto assets and those where the yields are determined based on the variation that they register, that are not regulated by monetary authority of Argentina and authorized by the BCRA”, says the statement that ruined the crypto sale in both entities.

The marketing of Banco Galicia and Brubank lasted just 36 hours.

The statement from the Argentine Central Bank says that the decision seeks to “mitigate the risk associated with the operation with these assets.”

According to the text of the message, the country’s monetary authority says that banks must promote the financing of investments related to the production, marketing and consumption of goods and services”, something that would not be part, according to the BCRA, of the crypto ecosystem.

The largest private bank in Argentina sold bitcoin for a day

The clients of Banco Galicia, a company that is part of Grupo Financiero Galicia, found themselves in the early hours of Monday, May 2, with a novelty on the virtual platform: the bank added the possibility of buying and selling four cryptocurrencies.

By choosing these new investments, the users of Galicia, the most important private banking entity in Argentina by number of assets, had the option “cryptocurrencies” together with the traditional investment alternatives: fixed term, bonds, shares and Cedear.

The novelty took customers by surprise. It was not for less: it was the first bank to offer this operation, in an environment of great interest in the use of crypto assets in Argentina.

The finance company chose to authorize access to four crypto assets: Bitcoin, Ether, USD Coin and Ripple.

The same measure had been taken by another Argentine bank, in this case one of the few 100 percent digital entities: Brubank, which also enabled a tab in its app to buy and sell cryptocurrencies.

Brubank also enabled a tab in its app to buy and sell cryptocurrencies.

Cryptocurrencies: the financial future

Ariel Sanchez, head of Investment Products, and Nicolás de Giovanni, Product Manager of Banco de Galicia, had said a few days ago that over 90 percent of people had told them they knew about digital assets and even many said they had high expectations. They said it in a survey carried out by the bank.

They also said that cryptocurrencies were “an investment” and “the financial future” of the planet.

In the survey of its users, more than 60 percent said that they wanted to add cryptocurrencies to their wallet. The youngest were the ones who most demanded the new benefit.

Based on this information and that their decisions are based on the experience and needs of their clients, this survey prompted them to carry out the project, they said.

For just two days, Banco Galicia’s home banking app enabled what was described as “an innovation in the way of investing”.

With the warning of the volatility of many of the cryptos, with very abrupt gains and losses, the application offered different options for different investment profiles.

The crypto sale was in effect for a few hours

In an interview held in the middle of last year, Fabián Kon, executive of the financial group that owns the Argentine bank, had indicated that the financial company was still “a little far” from the implementation of services linked to digital assets, although he did not dismiss it in the future.

It was August 2021 and Banco Galicia was talking about not ruling out the idea of ​​selling cryptocurrencies, although it said that it was probably not the time.

At that time, the BCRA launched almost in parallel a joint statement from the National Securities Commission in which the warning to Argentines about the “risks and implications” of this type of assets and their investment in them was present.

Among the warnings, it was mentioned that it is not legal tender money; that have a high volatility; that they suffer “operational disruptions and are susceptible to cyberattacks”; that they do not have “safeguards” such as deposit insurance; that they are prone to fraud and lack of transparency; and that they exhibit “risks of money laundering and can finance terrorists.”

The statement mentioned the potential breach of foreign exchange regulations” and the “cross-border nature of purchases and sales of digital assets.”

Adoption of cryptocurrencies in Argentina

Argentina is one of the countries in Latin America with the highest adoption of digital assets. It is estimated that at least 10 percent of the population with Internet access has ever operated with them.

In addition, surveys say that almost two out of four Argentines are willing to buy Bitcoin and other cryptocurrencies.

High volatility is one of the biggest problems that Argentines warn about cryptocurrencies. This is true, even the most relevant tokens, such as Bitcon and Ether, can have high price variations in a short time.

Even so, there are thousands of Argentines willing to invest in them since they have many problems accessing the dollar and the Argentine peso is constantly devalued.

The Central Bank of Argentina does not like digital assets like Bitcoin or stablecoins.

Argentines save in cryptocurrencies

Inflation has been hitting Argentina for years. In 2021, the consumer price index marked a 52 percent increase, and in the first four months of 2022, it’s already up 20 percent.

In this adverse environment for savings in Argentina, one of the options for those who have access to exchange platforms is stable coins or stablecoins.

Tokens such as DAI, Tether and USDC, which maintain a price tied to the value of the dollar, are a valid option for Argentines looking to protect themselves against inflation.

These assets have minimal variations, so in practice they work as a dollarization without the dangers of the volatility of cryptocurrencies such as Bitcoin, Ether and Litecoin, for example.

The Central Bank of Argentina does not like stablecoins either. In one of the statements related to digital assets, he said that “even the so-called ‘stable’ crypto assets (stablecoin), which have been designed to hold their values ​​with respect to other assets or basket of currencies, also show a high level of volatility in their price and have unknown backups in fiat currency. In addition, the value of digital assets depends on their level of acceptance, so it could be hit by adverse international events.

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