Banco Galicia was the first private bank in Argentina to start trading cryptocurrencies. The bank commented that the service would work through an intermediary, the company Lirium. This solution would allow banks outsource the purchase, custody and sale of cryptocurrencies. The company would segregate funds and act as a certified custodian. Initially, Banco Galicia would work with Bitcoin (BTC), Ether (ETH), the stablecoin USDC and Ripple (XRP). However, after the news broke, The Central Bank of the Argentine Republic (BCRA) warned that “Financial entities may not carry out or facilitate their clients to carry out operations with digital assets, including crypto assets and those whose yields are determined based on the variations that they register, which are not regulated by a national authority.“.
Because of this, Banco Galicia backed down with the implementation. “Those people who have invested in cryptocurrencies through the Bank will receive compensation for having trusted us.“, communicated Ariel H. Sanchez, Manager of Investment Products at Banco Galicia, and then said: “In this way, we reinforce our commitment to the main asset we have: the trust of our customers.“.
Before the ban on banks, Through its Twitter account, the BCRA warned about alleged risks of cryptocurrencies.
The BCRA considers it appropriate to remember the risks that crypto assets can carry, and recommends a prudent attitude in order to mitigate a possible source of vulnerability for users and investors ▶️ https://t.co/xq4nPSdAZy#Cryptocurrencies #Digital Assets
— BCRA (@BancoCentral_AR) May 4, 2022
“Crypto assets present risks and challenges for their users, investors and for the financial system as a whole. In recent years, the proliferation of crypto assets, the dynamics exhibited by their prices, their underlying technology and global reach, as well as the activities associated with their operations, have led different national and international organizations to issue recommendations in this regard.”, expressed the authorities of the BCRA and the National Securities Commission (CNV). Among the main criticisms of him are:
- They are not legal tender: As cryptocurrencies are not issued or supported by a central bank or government authority, they do not meet the necessary conditions to be considered legal tender or negotiable title. Therefore, from the entity they do not consider them real money.
- high volatility: Both institutions consider that the prices of these assets fluctuate significantly in short periods of time, which can lead to significant financial losses for their holders, including the possibility of losing all the resources invested.
- Operational disruptions and cyber attacks: Crypto asset exchange, negotiation and custody platforms may have operational problems during which users may not have access to their holdings and, as a result, may not be able to carry out operations, a situation that could be reflected in economic losses.
- Fraud, incomplete information and lack of transparency: According to the BCRA and the CNV, the information provided by crypto asset service providers may be complex or incomplete and may not adequately disclose the risks faced by users and investors. The prices of crypto assets are formed in the absence of effective mechanisms that prevent their manipulation, as the entities assure that the regulated securities markets have.
- Cross-border nature of operations: Certain actors involved in operations with crypto assets are not established in Argentina, so that a possible conflict could be outside the scope of jurisdiction of the Argentine courts and authorities.
The answers were immediate and many Twitter users commented with acidity and irony to official recommendations. Many of them focused on the fact that the Argentine peso has been depreciating against the US dollar.
degen shitcoin pic.twitter.com/nxe1Lo6Lbi
– Dieguito 🇦🇷 (@romerodg) May 4, 2022
Better we stay with the crunchy weights that melt in the hands, right? pic.twitter.com/jOe9jWQX0H
— Alan ⚡🌪️📈 (@whysocommunist) May 4, 2022
Because the Argentine peso is super reliable
— 🇦🇷 MercadoData 🇺🇦 (@ToroMercado1910) May 4, 2022
Other users they focused on the fact that the decentralization of cryptocurrencies makes the collection task more difficult.
Risks of crypto assets:
-You cannot be taxed
-You can not steal savings with inflation
-You can not retain property
-Transactions cannot be regulated
All risks to the state. The only risk for the person is that he does not know how to use them and loses them.
— Noah, a bartender bot 😌 (@NoahReaverEA) May 4, 2022
Disclaimer: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information set forth herein should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
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Investments in crypto assets are not regulated. They may not be suitable for retail investors and the full amount invested may be lost. The services or products offered are not aimed at or accessible to investors in Spain.