The growing crypto economy is constantly at odds with economic policies coming out of ailing Latin American economies like Argentina.
The Argentine pesos’ informal dollar exchange rate, called Dólar Blue, is doing better than usual, reaching a 497-to-1 ratio on April 25, and inflation numbers surpassed 100% year-over-year as of March. And yet, despite these numbers, the International Monetary Fund is negotiating a new payment agreement with Argentinian President Alberto Fernandez’s government, which reportedly includes a demand for more restrictive crypto policies from the Fernandez administration.
Argentina already has a $44 billion debt with the IMF, taken by former President Mauricio Macri in 2018. The new Argentinian government has been struggling to negotiate with the IMF for over a year, trying to ease the terms and let Argentina’s ailing economy recover.
As such, the IMF cleared the payment of $5.4 billion more to Argentina and reduced the agreement’s currency reserve target in early April 2023. Despite at least $20 billion in losses already this year due to a historic drought, the latest IMF representatives’ comments about Argentina remain optimistic about a new payment deal. Even Argentina’s Minister of Economy, Sergio Massa, tweeted about this possibility.
However, one of the controversial elements from the list of demands the IMF imposed last year was related to cryptocurrency regulation in Argentina. Cryptocurrencies might be a key part of how this story unfolds.
The IMF Takes A Strong Stance Against Crypto
Argentine authorities were open to creating new regulations, at the behest of the IMF, around the cryptocurrency industry, which gained tremendous popularity over the past decade due to rampant inflation and currency controls.
In fact, former Minister of Economy Martín Guzmán signed a letter of intent in March 2022, along with the head of Banco Central de la República de Argentina, Miguel Pesce, agreeing to discourage the use of cryptocurrency in an effort to quell “money laundering, informality, and disintermediation.”
Shortly after, according to the local newspaper Cronista, BCRA forced Banco Galicia, one of Argentina’s most prominent and known banks, to stop offering crypto services. The same central bank restriction against offering crypto services was forced on Brubank, another Argentine bank. Over the past year, the BCRA made the IMF-mandated policy clear: No bank can do business using cryptocurrency on Argentine soil. This has all been a matter of backdoor enforcement, not a legislative process.
“The only specific measure that the BCRA took to discourage the use of crypto assets was Communication A 7506 (of 5/5/2022), in which it prohibited financial entities from carrying out or facilitating their clients from carrying out transactions with digital assets and with other assets that reflect the price of digital assets,” bitcoin-savvy lawyer and nonprofit Bitcoin Argentina board member Ricardo Mihura Estrada told me in an interview.
This BCRA decision wasn’t surprising for Rodolfo Andragnes, president of the nonprofit Bitcoin Argentina. Andragnes told me the BCRA has taken this anti-crypto approach since 2014.
“As you see, none of these are prohibitions. But it may be that it will discourage you (from using crypto),” Andragnes said.
The anti-crypto IMF stance is familiar to economists and bitcoin users across Latin American countries. For example, the IMF issued a technical document about El Salvador, the first country to make bitcoin legal tender, in February 2023, underscoring how risky El Salvador’s bitcoin policies and activities are. Meanwhile, in Argentina, IMF warnings and central bank policies don’t appear to dampen demand among retail users for access to cryptocurrencies.
Argentina’s Crypto Scene Is Still Booming
In the context of Argentina, where the price of U.S. dollars has doubled since last year’s IMF negotiations began, crypto stablecoins like USDT and DAI continue to gain popularity through informal forex and crypto exchanges called Cuevas, offices spread across the country.
In addition, international crypto exchanges like Binance are expanding to capitalize on demand from the Argentinian market.
“This year is an election year, so action is unlikely,” Manuel Beaudroit, CEO of the Argentinian crypto startup Belo, told me during an interview. He added that his company’s relationship with regulators has always been “cordial and constructive.”
Meanwhile, Argentina’s Congress is about to pass a new anti-laundering law with explicit references to exchanges and purchase-sale traders. The law is aligned with the intergovernmental Financial Action Task Force recommendations, to be enforced by Argentina’s National Securities Commission. This law will create a new registry and guidelines for crypto exchanges and traders, classifying most companies offering services related to cryptocurrency as “virtual asset service providers.” Such VASPs will be responsible for reporting on the behaviors and activities of their users, which could raise privacy and feasibility concerns for anyone working in Argentina’s growing crypto economy.
It’s unclear how the local demand for cryptocurrencies is influencing the Argentinian government’s agenda, or if the IMF and international bodies are the main force driving national policies. After failing to meet the IMF requirements to refinance their debt, accommodating the IMF’s anti-crypto stance is perhaps one of the most immediate ways that Argentina can show foreign lenders goodwill at the proverbial negotiating table.
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