Argentina to Shut Down Crypto Business to Obtain $45 Billion Loan, Says IMF
The central bank of Argentina, a South American country, issued a statement Thursday saying that the country’s financial sector is not allowed to provide services related to digital assets which are not regulated. This effectively prohibits any crypto transactions within the official economy.
This decision comes just days after Banco Galicia and Burbank SAU, the two largest private banks by market value in the Argentine state, announced that they would let their customers buy cryptocurrencies (Bitcoin, Ethereum, etc.).
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The country decided to discourage the use of cryptocurrencies after the International Monetary Fund approved a $45 billion loan.
Banks in Argentina do not offer crypto services
As inflation rates hit 20-year highs, the country is taking a strong stance against digital assets.
The purpose of banning cryptocurrencies is to mitigate risk and protect their economic system, as the country views crypto assets as trustless and permissionless in nature. According to the BCRA press release:
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 the financial system as a whole.
IMF agreement to discourage cryptocurrencies
The move comes about a month after the International Monetary Fund said it would give the country a $45 billion loan.
The agreement obliges the country to discourage the use of cryptocurrencies in order to protect its financial sector. the Letter of Intent contains an overview of Argentina’s commitments to the agreement addressed with the IMF, stating:
To further preserve financial stability, we are taking significant steps to (i) discourage the use of cryptocurrencies with a view to preventing money laundering, informality and disintermediation”, in order to strengthen the country’s financial resilience .
The institution (BCRA) said Bitcoin and other cryptocurrencies could be used by criminals for money laundering and terrorist financing. Moreover, since they are considered untraceable, they (criminals or bad actors) can therefore use them extensively in drug trafficking, arms financing, prostitution, etc.
However, Chainalysis, a blockchain analysis company, reports that money laundering accounted for just 0.05% of all crypto transaction volume in 2021. This would mean that $33 billion has been laundered since 2017. In comparison, the United Nations Office on Drugs and crime estimates that $800 billion to $2 trillion is laundered each year using fiat currency, which accounts for about 5% of global GDP.
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the 2021 report from Chainalysis showed that Argentina ranked 10th with the highest crypto adoption rates in the world.
With this bold move to ban crypto services, the Argentinian government is trying to prevent its citizens from storing their money in crypto assets such as Bitcoin, Ethereum and stablecoins, as they have found digital assets to be a threat to the economic system of their country.
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