The Central Bank of the Argentine Republic (BCRA) has terminated all digital currency services offered by commercial banks. The BCRA said that no financial entity in the country can facilitate transactions in unregulated digital assets.
The directive is applicable to “cryptographic assets and those whose returns are determined according to the variations they record”, the BCRA notice states. The BCRA said the move was aimed at protecting the country’s financial system and citizens from the risks posed by digital currencies.
“The measure ordered by the BCRA Board of Directors aims 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 statement said.
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.
Central bankers also reminded the public of its advance warning on digital currencies issued in May 2021. The long list of risks it highlighted includes high volatility, operational disruptions and cyberattacks, money laundering/ financing of terrorism, as well as capital flight.
Argentina and the adoption of digital currency
The ban comes in very specific circumstances in the country. For one thing, it comes just days after two of Argentina’s top banks rolled out digital currency trading services.
This week, Banco Galicia announced for the first time that it would allow its customers to buy BTC, ETH and the USDC stablecoin. Burbank also made a similar announcement soon after.
Yahoo Finance reports that the banks’ move was prompted by growing demand for digital currencies as more Argentines seek to hedge against rising inflation. In fact, a survey conducted by Banco Galicia found that 60% of their customers want the digital currency offering.
Marcus Sotiriou, financial analyst at GlobalBlock, told the publication that the bank’s survey result comes as no surprise as Argentina is one of the countries with the highest adoption rate for digital currencies, the sixth more precisely.
“Cryptocurrencies can provide a beneficial alternative where the adoption of blockchain networks can determine token values, as opposed to the dramatic loss of purchasing power of the peso,” Sotiriou said.
Meanwhile, the BCRA struck a $45 billion bailout deal with the International Monetary Fund (IMF) in April. The bailout will ensure that Argentina will not default on its debt. However, the IMF requirement is that Argentina will discourage the use of digital currencies.
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