Yesterday the Central Bank of Argentina (BCRA) announced measures to discourage financial institutions from offering services related to digital assets, including cryptocurrencies.
This follows the launch on Monday of cryptocurrency offerings by Argentina’s largest private bank, Banco Galicia, and neobank Brubank. The service was added alongside other investments in their banking apps. These banks could now possibly be forced to stop these offerings.
The BCRA says that it aims to protect customers and the financial system as a whole by mitigating the risks that it believes are associated with digital assets, such as high volatility, cyberattacks, and money laundering.
It also mentions that “different actors involved in the operations with these assets may not be established in the country”. Banco Galicia uses Liechtenstein-based crypto startup Lirium for some of its solutions which might include digital asset custody.
However, the BCRA’s statement uses ambiguous language and it remains unclear whether it is only discouraging banks from offering digital asset services or actually banning them. There’s also the question of whether the central bank has the authority to impose a ban, given the area may instead fall under the remit of the country’s National Securities Commission (CNV). However, it’s generally not a good idea for banks to go against the wishes of their regulator.
A report from Chainalysis in late 2021 ranked Argentina in tenth position in terms of cryptocurrency adoption. In second place is India, which had a vaguely similar experience.
In 2020, the Indian Supreme Court reversed the central bank’s decision to prevent banks from dealing with cryptocurrency firms, effectively reversing a ban on crypto trading. However, in Argentina’s case, the banks have a closer involvement. It’s not just payments.