Argentina restricts payment applications and forbids cryptocurrency transactions

Argentina’s central bank recently announced that it would restrict payment applications from facilitating transactions with cryptocurrencies that are not regulated by the competent national authority and authorized by the Central Bank of the Argentine Republic (BCRA). This move aims to prevent the illegal use of digital assets, particularly in the context of hyperinflation in the country, which is driving crypto adoption.

Cryptocurrencies are not currently regulated in Argentina, and this lack of regulation has led to a surge in the use of digital assets as a means of preserving wealth amid the country’s economic instability. However, this has also created opportunities for criminal activities such as money laundering and tax evasion, as well as increased volatility and financial risk for investors.

The BCRA’s new regulations require payment service providers that offer payment accounts (PSPCP) to comply with the law and avoid carrying out or facilitating operations with digital assets that are not authorized by the central bank. This means that payment apps in Argentina will no longer be able to process transactions involving unregulated cryptocurrencies.

Argentina has one of the worst inflation rates in the world, and this month, it exceeded 100% for the first time in thirty years.

In recent years, a number of local cryptocurrency firms have been promoting Bitcoin and other cryptocurrencies as a financial lifeline for ordinary Argentines who are unable to save or are being forced into poverty due to the devaluation of the peso. Additionally, a well-known presidential contender has been advocating for Bitcoin and other cryptocurrencies as a way to lift the country out of its economic woes.

The ban on cryptocurrency transactions via payment apps is expected to have a significant impact on the local crypto industry in Argentina, which has been experiencing rapid growth in recent years. The move is also likely to be seen as a setback for the wider crypto community, which has been hoping to see more countries adopt digital currencies as a means of protecting their citizens’ wealth.

While the ban on crypto transactions is a blow to the crypto community in Argentina, it is important to note that the country’s government has not completely banned cryptocurrencies. It has simply banned their use via payment apps, and it remains to be seen whether or not this will have a long-term impact on crypto adoption in the country.

Furthermore, the BCRA has expressed a willingness to engage with the crypto industry and work towards developing a regulatory framework that will foster the growth of the industry while protecting consumers and maintaining financial stability.

In conclusion, Argentina’s decision to restrict payment applications and forbid cryptocurrency transactions may be seen as a step back for the crypto industry in the country. Still, it is a necessary move to protect consumers and prevent illicit activities. As the country continues to navigate its economic challenges, it is critical to establish a regulatory framework that balances innovation and security, and promotes the growth of the digital economy.