Tiago Varzim

<div id="highlights-block_627903e37bb15" class="highlights">
 <ul>
 <li>Unregulated crypto trading is a risk to investors and the financial system, Central Bank says</li>
 <li>Pressures from the IMF, after a recent debt restructuring deal, may have played a role in this decision</li>
 </ul>
 
</div>



Argentina’s central bank has decided to ban unregulated crypto transactions in traditional banks. Once regarded as a crypto-friendly country, the pendulum has swung in Argentina after the International Monetary Fund (IMF) reportedly pressured policymakers. This announcement comes just days after Argentina’s biggest private bank, Banco Galicia, <a href="https://cms.blockworks.co/argentinas-biggest-private-bank-adds-crypto-trading/" target="_blank" rel="noreferrer noopener">decided to add crypto trading</a>.



“Financial institutions can’t transact or facilitate transactions to their clients in digital assets trading, including crypto assets and those whose income is determined by crypto’s value fluctuation,” the Central Bank of the Republic of Argentina said in a <a href="https://www.bcra.gob.ar/Noticias/BCRA-desalienta-oferta-criptoactivos-sistema-financiero.asp" target="_blank" rel="noreferrer noopener">statement published</a> Thursday. This represents an actual ban, because there are currently no regulated digital assets in the country. 



The regulator said its actions are designed “to mitigate risks associated with” crypto, both for investors and “the whole financial system.” Argentina’s central bank reckons that banks should focus their efforts on financing the real economy instead of digital assets. Moreover, it implies that these transactions would involve unregulated entities established outside Argentina, which could breach current laws. 



The action follows an alert in May 2021, during which authorities highlighted the risks of cryptoassets and advised investors to be “prudent” in their investment decisions. These risks include “high volatility, cyberattacks, money laundering and terrorism financing,” as well as infringements on transnational currency exchange operations, the central bank said. 



Last week, Banco Galicia and digital bank Brubank SAU revealed that they were offering digital assets trading services, including mainstream cryptocurrencies such as bitcoin, ether and the USDC stablecoin. Until now, Argentines had to use centralized exchanges through wallets or trade directly through over the counter exchanges.



In 2017, Argentina received a $44 billion bailout from the IMF — the largest-ever relief package. The institution recently approved a debt restructuring deal and, in tandem, both parties agreed that Argentina would “discourage the use of cryptocurrencies with a view to preventing money laundering, informality and disintermediation,” according to a letter of intent sent in March by politicians to the IMF’s managing director, Kristalina Georgieva. The stated goal was to “further safeguard financial stability.”&nbsp;



The country has been grappling with high inflation and the devaluation of its currency, the peso, for years now. Argentina’s monthly inflation rate rose to 6.7% in March alone, surpassing forecasts, <a href="https://www.indec.gob.ar/uploads/informesdeprensa/ipc_04_22AD79164254.pdf" target="_blank" rel="noreferrer noopener">according to the country’s latest data</a>. The annualized inflation rate hit 55.1% that month, reaching the highest level in two decades due to increases in food and energy prices.



Locals, in turn, have started investing in crypto to protect their savings from shrinking purchasing power, and employers have been allowed to pay up to 20% of an employee’s salary in cryptocurrencies. However, the latest decision taken by the central bank may reverse the trend towards mainstream crypto adoption in the country.



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Argentina

Argentina’s Central Bank Bans Crypto Trading

<div id="highlights-block_62713125a2ba4" class="highlights">
 <ul>
 <li>Banco Galicia’s move targets young clients and highlights a global trend in crypto adoption by traditional banks</li>
 <li>Argentines are increasingly using cryptocurrency to protect their savings against rampant inflation</li>
 </ul>
 
</div>



Banco Galicia, Argentina’s biggest private bank by market cap, has added crypto trading to its investment platform, the bank confirmed Monday. Argentines rank among the world’s top adopters of digital assets in part due to inflation in the South American country.



The move targets young clients, who survey data shows want streamlined access to crypto via traditional banking avenues, the bank’s senior product manager Nicolas de Giovanni told <a href="https://www.bloomberg.com/news/articles/2022-05-02/two-argentine-banks-allow-customers-to-buy-cryptocurrencies" target="_blank" rel="noreferrer noopener">Bloomberg</a>.&nbsp;



Clients can buy digital assets on the same platform they use to buy stocks or bonds through the bank’s partnership with crypto wallet <a href="https://www.lirium.com/" target="_blank" rel="noreferrer noopener">Lirium</a>. Unlike with other exchanges, however, users can’t withdraw or send their cryptocurrency.



The bank confirmed it was launching crypto trading in the home banking app after Argentines spotted the new function on Monday. The feature will initially only be available to clients who receive their income via direct deposit.



Banco Galicia, which is listed on the Nasdaq and the Buenos Aires stock exchange, is the first major bank in the country to provide such services.



But it won’t be the only one: Digital bank Brubank SAU will also offer crypto trading services, including bitcoin, ether and USDC, starting this week as well.&nbsp;



Until now, Argentines had to use centralized exchanges through wallets or trade directly through over-the-counter exchanges.



Argentina has been grappling with high inflation and the devaluation of its currency, the peso, for years now. In 2017 it received a $44 billion bailout from the International Monetary Fund, the institution’s largest-ever relief package. Locals in turn have started investing in crypto to protect their savings from shrinking purchasing power.



Banco Galicia joins a growing number of traditional banks worldwide moving into digital assets. Last month, Commerzbank, Germany’s fourth-largest bank, confirmed it <a href="https://cms.blockworks.co/german-banking-giants-move-into-crypto-highlights-growing-trend-in-europe/" target="_blank" rel="noreferrer noopener">wants to offer digital assets</a> custody and exchange services to clients, focusing initially on institutional customers.



In Argentina, as well as other Latin American countries such as El Salvador, crypto adoption is becoming mainstream. Recently, Argentine <a href="https://cms.blockworks.co/argentina-moves-to-incubate-crypto-startups-under-regulatory-eye/" target="_blank" rel="noreferrer noopener">authorities announced an innovation hub</a> to boost fintech and crypto startups in a regulated environment. Employers can also pay up to 20% of an employee’s salary in cryptocurrencies.



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