Argentina’s Central Bank Prohibits Payment Service Providers from Offering Cryptocurrency Trading and Brokerage Services

By 0xK2 05/7/23 2:23 AM

Argentina’s central bank has issued a new advisory for payment service providers, stating that they are not permitted to offer trading and brokerage services for digital assets such as cryptocurrencies that are not regulated in the country.

The notice specifically prohibits payment service providers from conducting transactions themselves or offering their users the ability to initiate transactions from their applications or web platforms. In addition, payment service providers are not allowed to make auto-buy buttons available, and users who wish to purchase cryptocurrencies must carry out the transactions themselves.

The central bank’s statement explains that the notice aims to mitigate the risks that transactions using digital assets may pose to users of financial services and to the country’s payment system. This announcement comes in the context of Argentina’s repeated economic crises and hyperinflation, which have made virtual currency an attractive option for many individuals in the country seeking to hedge against inflation or invest.

According to a 2022 study by crypto payment firm TripleA, over 2.5 million people, or 5.6% of the total Argentinean population, are estimated to own cryptocurrencies. Furthermore, a survey conducted in April 2022 by Americas Market Intelligence found that nearly 51% of Argentine consumers had purchased cryptocurrencies, with 27% regularly purchasing them. Investment and hedging against inflation were among the top reasons for buying.

However, the Argentine government has also been concerned about the outflow of foreign currency out of the country due to citizens purchasing Bitcoin and other cryptocurrencies. In July 2022, the Argentine central bank issued a notice that anyone who had purchased Bitcoin or other cryptocurrencies with fiat pesos in the past 90 days would no longer be able to purchase US dollars at the official rate on the Argentine foreign exchange market MULC.

The Argentine government has also been tightening regulations on cryptocurrencies in recent months. In May 2022, the central bank issued a notice stating that the country’s banks cannot conduct or offer their customers transactions involving cryptocurrencies and their yield products. These moves may be connected to Argentina’s agreement with the International Monetary Fund (IMF), which included the phrase “deterring the use of virtual currencies” when the agreement was signed in March 2022.

It remains unclear what features will be banned under the new advisory for payment service providers, but this latest move by the Argentine central bank highlights the ongoing tension between the government’s desire to regulate the use of digital assets and the growing popularity of cryptocurrencies among the country’s citizens.