A statement from the central bank of Argentina has revealed the ban of digital financial services in the country’s financial sector, which effectively outlaws the use of or transaction in cryptocurrency in the country.
The latest move came just a couple of days after the two largest banks in Argentina, in terms of market valuation, announced the introduction of crypto services to cater to their customers as part of their drive to embrace digital asset service delivery.
It is widely reported that the decision of the country to halt the use of cryptocurrency is due to the condition given to it before it could be able to access the $45 billion International Monetary Fund (IMF) issued loan.
Banks to Stop Offering Crypto Services
For some years, the Argentinian economy has struggled with a high inflation rate. The recent one is the highest in 20 years, culminating in the country taking a strict stance against digital assets.
Economists believe that the government has a genuine reason for choosing to ban cryptocurrency, and that reason is to safeguard the already ailing economy. The country does not regard crypto assets as reliable and viable for economic growth, hence its ban.
In all, the regulatory body in charge of financial products and services added that cryptocurrencies are high-risk assets and that mitigating their impacts on the economy will be more expensive. The best thing to do is protect the country’s existing financial services and structures.
The latest moves come just a month after the international financial body agreed to grant the country a loan request of $45 billion. And part of the agreement is that the government should ban the use of digital assets to protect its economy from the volatility associated with crypto transactions.
Furthermore, the letter of intent between Argentina and the IMF detailed the commitment required from the part of the country before the finalization of the loan deal; the letter highlights the stoppage of all crypto and its related operations and transactions in the country to safeguard the financial sector and the economy as a whole.
The central bank of Argentina also echoed the famous rhetoric about the use of cryptocurrencies by criminals to launder funds, commit illicit financial transactions, and fund terrorism, drug deals, and other illegal activities.
Meanwhile, a blockchain analysis company, Chainalysis, declared that the crypto industry accounts for just a fraction of money laundering over fiat, which is a measly 0.05% as of last year. Proponents of cryptocurrency are always ready to counter any claim about the high crime rate involving digital assets.
To further strengthen the argument, the United Nations Office of Drugs and Crimes estimates laundered funds in hard currency at $800 billion to $2 trillion annually, representing about 5% of the world’s Gross Domestic Product (GDP).
By following the directive of the IMF and banning the use of cryptocurrency, the government of Argentina is keeping its citizens away from digital assets while further leaving them in a disadvantageous position.