Argentina’s Central Bank has prohibited financial payment service providers from offering cryptocurrency transactions, citing a need to reduce the exposure of digital assets to the payments system. The move comes as Argentinians increasingly resort to digital currencies to protect wealth amid soaring inflation.

Argentine Bans Crypto Transactions to Citing Risks to Financial Systems

In a recent statement, the Central Bank of the Argentine Republic (BCRA) said that payment providers could not offer cryptocurrency services through their platforms or applications. The central bank said that the decision was to “mitigate risks.”

“Payment service providers that offer payment accounts (PSPCP) will not be able to carry out or provide their customers with operations with digital assets, including cryptoassets, that are not regulated by the competent national authority and authorised by the Central Bank of the Argentine Republic (BCRA).”

The move reduces the ease of transactions in the crypto space for Argentinians, removing the opportunities the technology offers the public. For one, the new rule bans major platforms, including Mercado Libre, Latin America’s answer to Amazon, from accepting Bitcoin and crypto payments.

Meanwhile, some research groups inside the country have already opposed the plan. The fintech chamber of Argentina has urged the national authority to reverse the decision, indicating that it places a significant limit on a technology that offers numerous benefits and opportunities for society.

Invitamos al BCRA a revisar esta medida y a trabajar en conjunto con la Cámara Argentina Fintech y otros actores relevantes del sistema para establecer un marco que permita el desarrollo responsable y sostenible de la industria cripto en Argentina.

— Cámara Argentina Fintech (@CamaraFintechAr) May 5, 2023

The recent crypto clampdown by Argentina’s government comes as the country has been one of the fastest-growing cryptocurrency markets. As reported, Argentina has one of the highest ownership rates of digital assets at 23.5%, only second to Turkey at 27.1%.

The growing crypto adoption is primarily attributed to the country’s soaring inflation. Argentina’s inflation rate has soared past 100% this year. According to the country’s statistics agency, inflation hit 102.5% in February, suggesting the price of many consumer goods has more than doubled since 2022.

The shift toward digital tokens comes as residents of the country might have difficulty getting their hands on physical dollars or other currencies amid tight capital controls.

Meanwhile, Argentina’s government has historically taken a dynamic stance on cryptocurrency. While it warned users of the risk of digital assets in 2014, the government acknowledged the benefits of blockchain and cryptocurrencies in driving the economy in 2017.

The country’s central bank also set regulations for cryptocurrency exchanges in 2019, requiring them to comply with anti-money laundering and counter-terrorism financing regulations. In the same year, the country banned the purchase of cryptocurrency using credit cards as a partial measure to stabilize the Argentine peso.

Is the New Crypto Ban Connected with the IMF?

Argentina’s president Alberto Fernandez is negotiating a new payment agreement with the International Monetary Fund (IMF) to help ease the country’s economic crisis. However, the agreement reportedly includes new demands for more restrictive crypto policies.

According to a report by Forbes, the IMF has been pushing for tighter regulations on cryptocurrencies in Argentina, which has raised concerns that the recent crypto ban in the country could be partly connected to the negotiations with the IMF.

The Argentinian government has struggled to negotiate with the IMF for over a year to ease the terms and let Argentina’s ailing economy recover. In early April, the IMF cleared the payment of $5.4 billion more to Argentina, which came on top of the $44 billion debt the country took from the IMF in 2018.

This article originally appeared on The Tokenist

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