The central bank of Argentina surprised fintechs this month when it unveiled a crypto ban, in practice forbidding all neobanks in the country from offering trading services.
Repercussions of the regulation, considered harmful for the sector, were immediately felt across the fintech and crypto ecosystem. Cryptocurrency trading is usually one of the many revenue streams digital banks have.
“This forces us to suspend the possibility of operating crypto, where we already have more than 300,000 accounts,” Pierpaolo Barbieri, CEO and founder of neobank Ualá, said in a Tweet. “It hurts.”
According to the new ruling, Argentine digital wallets cannot “carry out or facilitate operations with digital assets, including crypto assets.” The central bank pinned its decision on “mitigating the risks” to the public and the financial system.
The regulation is expected to affect Mercado Pago, in particular, the leading digital wallet in the country. Mercado Libre’s digital bank had already rolled out such a product in Brazil with strong adoption, as did competitor Nubank, each reaching one million customers quickly.
Argentina Crypto: Fintech Industry Rebuffs The Regulation
The adoption of cryptocurrencies and stablecoins is significant in Latin America. Even as the rise in interest rates has sent prices tanking, the collapse of FTX and Signature Bank cast fears over the industry. In countries like Argentina, with 110% inflation, stablecoins are often a refuge for savers.
To be sure, the decision was met with high criticism in the fintech industry. In a press release, the local fintech association expressed its “deep concern and disagreement” with the new regulation.
“If Argentine regulators aim to protect consumers, this latest measure is unlikely to be an effective strategy. This measure could reduce the security of Argentines, who already face significant economic pressures.” Caroline Malcolm, VP Global de Política Pública, Chainalysis, said. “The data is clear: bans or near-bans do not work.”
The Decision Follows A Previous Ban on Argentine Banks
The measure follows an earlier ban that affected banks. Last year, the central bank forbade traditional lenders from offering crypto trading when Galicia, one of the most prominent local players, announced it was ready to launch the tool. With this new disposition, the regulator said, it was providing a level-playing field.
But fintech experts disagree.
“I strongly reject that it is reasonable to bracket (fintechs) with financial entities in terms of prohibitions,” Santiago Mora, a lawyer and fintech head at GPG Advisory Partners, told Fintech Nexus. He said both have “completely different activities, risks, income, costs, and regulations.”
It was understood that pure crypto companies would still be allowed to operate within digital assets’ boundaries if they did not provide payment services. For Mora, however, the regulation has “negative effects” for neobanks and crypto companies. “The restriction has no justification,” he said. “Blockchain technology and digital assets have immense benefits that have not been put into the equation by the central bank.”
Fintech Nexus News