On May 4, the Central Bank of Argentina issued a statement stating that payment providers are now prohibited from facilitating crypto transactions. The objective behind this decision is to minimize the country’s payment system exposure to digital assets. Payment providers, including fintechs and financial institutions, are expected to adhere to these rules.
According to the central bank, payment service providers offering payment accounts are not allowed to conduct transactions with digital assets or facilitate operations involving cryptocurrencies that are not regulated by the relevant authorities and authorized by the Central Bank of the Argentine Republic. As cryptocurrencies are not regulated in Argentina, this decision potentially affects all coins and tokens in the nation.
The impact of this measure on Argentina’s local crypto industry is uncertain, with local media reporting that payment providers have chosen not to comment on the decision. Argentina’s fintech chamber urged the government to reconsider the decision, highlighting the “multiple benefits and opportunities” that the technology offers society.
Hyperinflation in Argentina is contributing to the increased adoption of crypto in the country. In April, the price of Bitcoin (BTC) achieved a record high in the Argentine peso (ARS), with the exchange rate surpassing 6.59 million ARS, reflecting a year-to-date increase of over 100%. Simultaneously, Argentina’s inflation rate skyrocketed to 104.3% on an annual basis in March, while the country’s currency has lost almost 50% of its value against the US dollar over the course of a year.
These factors have amplified Bitcoin’s popularity in Argentina as a safe haven from the ongoing economic crisis. In December last year, the Argentine province of San Luis made headlines when it permitted the issuance of its own stablecoin pegged to the US dollar. Additionally, data from Chainalysis revealed that more than 30% of consumers in Argentina use stablecoins for everyday purchases, most likely for small retail transactions under $1,000.
This decision by Argentina’s central bank poses several questions: Will it hamper the growth of the nation’s crypto industry, or will it strengthen the regulatory framework surrounding cryptocurrencies? Furthermore, will this decision impact Argentina’s ongoing economic crisis and hyperinflation? Time will tell whether the central bank’s stance ultimately proves beneficial, but for now, the ruling seems to be met with skepticism by the fintech community.