On May 2, 2022, BitcoinDynamic published as the day's featured news: «Banco Galicia opens investments in bitcoin and cryptocurrencies in Argentina.» The next day, Brubank, another Argentine bank, also incorporated the purchase and sale of digital assets among its services. A new era seemed to begin in the country of tango, in relation to the adoption of bitcoin. But the bitcoiner joy did not last long. On May 5, 2022, the Central Bank of the Argentine Republic (BCRA) issued a regulatory statement discouraging investment in cryptocurrencies through the financial system. In this statement it was explicitly reported that in Argentina – which at that time was under the presidency of the Kirchnerist lawyer Alberto Fernández – A prohibition began to take effect to provide services such as those that Galicia and Brubank had incorporatedjust 3 days ago:
«Financial entities will not be able to carry out or facilitate their clients to carry out operations with digital assets, including crypto assets and those whose returns are determined based on the variations that they register, that are not regulated by a national authority and authorized by the Central Bank of the Argentine Republic (BCRA)». BCRA statement, May 5, 2022.
The basis for such a restriction was, according to the BCRA, «the risks associated with this type of operations.». Among them they mention: «its high volatility, the risks associated with operational disruptions and cyber attacks, asset laundering/terrorist financing and potential non-compliance with exchange regulations, the absence of safeguards and complete information that current regulations provide for.» for users of financial services and the cross-border nature of operations. Curiously, many of these risks were not present in the services that Galicia and Brubank had begun to offer, since they did not allow depositing or withdrawing bitcoin or cryptocurrencies. It was simply an exposure to the price of digital assets within their web platforms. Furthermore, the risk of the much-feared “volatility” was mitigated with the incorporation of stablecoins such as USDT among the cryptoassets offered. On the other hand, It is at least curious that the BCRA—with those same criteria—had no problems with allowing operations with Argentine pesos.. This is a currency that is also volatile, very inflationary, highly devalued and has turned out to be a terrible reserve of value, as can be seen in the following graph that shows its devaluation until, approximately, the moment in which the BCRA issued the statement to the which is referenced here:
Devaluation of the Argentine peso in comparison with the US dollar, since the exit of convertibility in 2002. Source: arg_endatos – X.
The freedom for banks to offer bitcoin is a long time coming
With the arrival of Javier Milei to the presidency of the Nation, on December 10, 2023, the hopes of seeing greater freedom for the bitcoin ecosystem and cryptocurrencies were renewed.
After all, freedom in its many facets is a value widely defended by the president, who defines himself as a liberal libertarian, called his electoral alliance «La Libertad Avanza» and closes his speeches by shouting «Long live freedom, damn it!» !». On numerous occasions, Milei (although he has not defined himself as a bitcoiner) has expressed himself favorably about the digital currency created by Satoshi Nakamoto. She has even said that in the free currency competition regime that he plans to implement at some point in Argentina, payments with BTC will be allowed. The current chancellor, Diana Mondino, had assured in August 2023 (before the presidential elections) that Argentina would be “a paradise for bitcoin” if Milei became president.
Javier Milei (photo) has expressed himself favorably about bitcoin on several occasions. Source: La Nación – YouTube – Screenshot by BitcoinDynamic. But, at the time of this publication in May 2024 The BCRA order continues in full force. Financial entities that are under the regulatory orbit of the Central Bank of the Argentine Republic are prohibited from offering the service of buying and selling bitcoin and cryptocurrencies. The fact becomes notable when, at an international level, it is being observed that commercial banks have an increasingly close relationship with the bitcoin industry. Not only offering services linked to cryptocurrencies but also adding exposure to bitcoin in their corporate treasuries. If the Argentine Government does not take action on the matter and does not reduce (or completely eliminate) the existing prohibitions, The country's traditional financial sector risks being left out of a multibillion-dollar industry whose future projections are more than optimistic. As BitcoinDynamic has already reported, Argentina's stock platforms (among which we can mention IOL InvertirOnline and Cocos Capital) have found a way to offer cryptocurrency trading to their clients. It should be mentioned that these companies do not operate under the regulations of the BCRA, but of the National Securities Commission. But, for the banks, it remains an unfinished business that the current Libertarian government must address promptly if it wants to honor its campaign commitments.
What is stopping Milei's government?
There has been no official statement from Javier Milei or any official about the reasons why the BCRA ban remains in force. However, «connecting the dots» and considering recent events, it can be thought that condescension with credit, financial and international regulatory organizations could be one of the main reasons.
Argentina is one of the member countries of the Financial Action Task Force (FATF), which has historically been unfriendly to virtual assets. 4 years ago, in 2020, BitcoinDynamic published an article with the title «If you do these things with bitcoin and cryptocurrencies you could be a criminal, according to the FATF.» There it was stated that many practices that are common among bitcoiners (such as having many wallets or moving a large volume of money in a short time) activate FATF alarms and are reasons for suspicion. The FATF establishes global standards with measures that purportedly seek to combat money laundering, terrorist financing and other threats related to the integrity of the international financial system. Failure to comply with these recommendations can have significant consequences for any member nation.. Entering the FATF «blacklist» can mean international financial isolation, in addition to sanctions and trade restrictions. Currently, Argentina—in addition to receiving periodic inspections by the FATF—is also meeting fiscal goals imposed by the International Monetary Fund (IMF). These goals, which date back to President Alberto Fernández's administration but remain in full force, include an «anti-bitcoin clause.» It encourages the government to «discourage» the use of cryptocurrencies in the country.
Argentina is a debtor to the International Monetary Fund (IMF) – Source: stock.adobe.com In November 2023, before becoming president, Milei anticipated that he would not have a rebellious attitude towards the international organizations with which Argentina maintains debts. On the contrary, he would honor the commitments made:
«We were very explicit: we want a small state that has the characteristic of honoring its commitments. With this I am saying: I am going to make the fiscal adjustment to pay the debt. Javier Milei, president of Argentina.
Although his statement did not specifically refer to the anti-bitcoin clause of the agreement with the IMF, this is certainly one of the commitments that the State had assumed. Given the current circumstances, It seems logical to think that the government is complying with the requirements of the Monetary Fund.
Strict compliance or freedom?
In this context, the Argentine government faces a dilemma. The dilemma lies in continuing to restrict the financial innovation that the adoption of bitcoin brings with it to comply to the letter with the requirements of creditors and international financial organizations; either daring to follow a more liberal path, while seeking the best way to honor commitments made to creditors. The decision made will have strong long-term impacts. The world is giving signs that bitcoin expansion is unstoppable. The ETFs approved in January in the United States seem to have changed the game and today even banks and large traditional financial corporations are investing in bitcoin. And the decision he makes will also serve—among other things—to evaluate, on the day Milei's government ends, whether the «Long live freedom, damn it!» It was truly the beacon that illuminated the president's decisions or just another political slogan.
Disclaimer: The views and opinions expressed in this article belong to its author and do not necessarily reflect those of BitcoinDynamic. The author's opinion is for informational purposes and under no circumstances constitutes an investment recommendation or financial advice.