Crypto usage is on the rise across Argentina, despite the anti-crypto IMF deal

The growing crypto economy is constantly at odds with economic policies coming out of ailing Latin American economies like Argentina.

The Argentine peso’s informal dollar exchange rate, called Dólar Blue, is doing better than usual, reaching a ratio of 497 to 1 on April 25, 2023, and inflation figures passed 100% year-on-year as of March 2023. And yet, despite these figures, the International Monetary Fund is negotiating a new payment agreement with Argentine 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 over by former president Mauricio Macri in 2018. The new Argentine government has struggled to negotiate with the IMF for over a year, trying to ease terms and allow Argentina’s ailing economy to recover .

As such, the IMF approved the payment of $5.4 billion more to Argentina and reduced the agreement’s foreign exchange 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 on Argentina remain optimistic about a new payment agreement. Even Argentina’s economy minister, Sergio Massa, tweeted about this opportunity.

However, one of the controversial items from the list of demands made by the IMF last year was related to the regulation of cryptocurrency in Argentina. Cryptocurrencies could be a key part of how this story plays out.

The IMF is taking a strong stance against crypto

Argentine authorities were open to creating new regulations, at the behest of the IMF, around the cryptocurrency industry, which has gained immense popularity over the past decade due to rampant inflation and currency controls.

In fact, former Economy Minister Martín Guzmán signed a letter of intent in March 2022, together with the head of Banco Central de la República de Argentina, Miguel Pesce, agreeing to discourage the use of cryptocurrency in an effort to stop “money laundering, informal and disintermediation .”

Shortly after, according to local newspaper Cronista, BCRA forced Banco Galicia, one of Argentina’s most prominent and well-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 clear the IMF-mandated policy: No bank can do business using cryptocurrency on Argentine soil. All of this has been a matter of backdoor enforcement, not a legislative process.

“The only specific measure that the BCRA took to discourage the use of cryptoassets was Communication A 7506 (of 5/5/2022), in which it prohibited financial entities from conducting or facilitating for their clients from conducting transactions with digital assets and with other assets which reflects the price of digital assets,” bitcoin-savvy lawyer and non-profit Bitcoin Argentina board member Ricardo Mihura Estrada told me in an interview.

This BCRA decision was not surprising to Rodolfo Andragnes, president of the non-profit organization Bitcoin Argentina. Andragnes told me that BCRA has been taking this anti-crypto approach since 2014.

“As you can see, none of these are bans. But it may be that it will deter 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 on El Salvador, the first country to make bitcoin legal tender, in February 2023, which underlines how risky El Salvador’s bitcoin policies and activities are. Meanwhile, in Argentina, IMF warnings and central bank policies do not appear to be dampening demand among retail users for access to cryptocurrencies.

Argentina’s crypto scene is still thriving

In the context of Argentina, where the price of the US dollar has doubled since last year’s IMF negotiations began, cryptostable coins such as USDT and DAI continue to gain popularity through informal currency and crypto exchanges called Cuevas, offices spread across the country.

In addition, international crypto exchanges such as Binance are expanding to take advantage of the demand from the Argentine market.

“This year is an election year, so action is unlikely,” Manuel Beaudroit, CEO of Argentine crypto startup Belo, told an interview. He added that the company’s relationship with regulators has always been “cordial and constructive.”

Meanwhile, Argentina’s Congress is in the process of passing a new anti-money laundering law with explicit references to exchanges and buy-sell traders. The law is in line with the recommendations of the intergovernmental Financial Action Task Force, which will be enforced by Argentina’s National Securities Commission. This law would create a new registry and guidelines for crypto exchanges and traders, and classify most companies that offer services related to cryptocurrency as “virtual asset service providers.” Such VASPs would be responsible for reporting on the behavior and activities of their users, which could raise privacy and enforceability concerns for anyone working in Argentina’s growing crypto-economy.

It is unclear how the local demand for cryptocurrencies affects the Argentine government’s agenda, or whether the IMF and international bodies are the main force driving national policy. Having failed to meet IMF demands to refinance its debt, accommodating the IMF’s anti-crypto stance is perhaps one of the most immediate ways Argentina can show foreign lenders goodwill at the proverbial negotiating table.

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