Argentina’s central bank steps in to block new crypto offerings from banks

The Central Bank of Argentina (BCRA) imposed the kibosh on financial institutions offering crypto trading just days after two of the country’s largest banks signaled they were opening up to digital assets.

On May 5, BCRA said the move is to mitigate the risks crypto poses to users and “the financial system at large,” citing crypto’s high volatility, use for money laundering, and lack of regulatory protections.

The news followed an announcement Monday by two of the country’s largest banks, Banco Galicia and Brubank, that they would allow their customers to buy Bitcoin (BTC), Ethereum (ETH), USD Coin (USDC) and Ripple (XRP).

The decision to open crypto trading was made by a survey conducted by Banco Galicia, where 60% of respondents said they would like to have easier access to digital currencies.

The central bank has long been critical of crypto, warning the public about the risks in May last year and reiterating concerns about volatility and money laundering, though the bank said there were no signs of “significant levels of adoption and usage.”

According to figures from Statista’s data analysis, 21% of respondents in Argentina had owned or used crypto in 2021, making it the sixth highest adoption rate in the world and the highest rate in America.

Argentina’s inflation rose another 6.7% in March – the highest rate in 20 years – to reach 55.1% year-on-year, according to INDEC, the country’s statistics agency. Some Argentines have turned to crypto to hedge against rising inflation. In April, a rural town began mining cryptocurrency to fight inflation.

Related: Colombia cracks down on crypto tax evasion as adoption thrives

The shift in focus from last May may be related to an expanded International Monetary Fund (IMF) debt plan of $44 billion that included a clause for Argentina to “disadvise the use of cryptocurrencies.”

The central bank’s announcement contradicts the plans of the mayor of Argentina’s capital, Buenos Aires. In late April, Mayor Horacio Rodríguez Larreta announced plans to digitize the city to allow citizens to pay their taxes in cryptocurrencies alongside other blockchain plans.