Argentina's Central Bank Prohibits Payment Service Providers from Supporting Cryptocurrencies

Argentina's central bank, the Banco Central De La Republica Argentina (BCRA), has issued a new announcement calling on payment service providers to stop supporting crypto assets. The bank has prohibited payment service providers from conducting operations with digital assets, including crypto assets, that are not regulated by the competent national authority and authorized by the BCRA. The move follows the country's ongoing currency crisis, with the peso losing over 98% of its all-time high value against the US dollar, according to the government-approved exchange rate.

The central bank aims to minimize the risks associated with crypto assets and financial services for its citizens. The bank issued a statement saying that the measure is designed to mitigate the risks that operations with crypto assets could generate for users of financial services and the national payment system. The bank said that this standard aligns the rules that payment service providers and financial institutions must comply with. Financial institutions in the country have already been subject to a similar restriction since May 2022.

The move by the BCRA follows other countries' attempts to regulate the use of cryptocurrencies, including China and India. Both countries have taken steps to ban crypto transactions or shut down cryptocurrency exchanges entirely. Meanwhile, countries such as El Salvador have adopted Bitcoin as legal tender, hoping to promote financial inclusion and encourage the use of crypto assets. However, such moves have sparked controversy and drawn criticism from some quarters.

In the case of Argentina, the central bank's move aims to address the country's currency crisis and protect its citizens from the risks associated with crypto assets. The peso's rapid depreciation against the US dollar has created significant economic challenges for the country, with high inflation, unemployment, and poverty rates. The black market exchange rate that Argentinians use is reportedly almost twice as weak as the official rate that the government recognizes.

The use of cryptocurrencies has become increasingly popular in Argentina, with many citizens turning to crypto assets as a means of preserving their wealth and protecting their savings from the peso's depreciation. However, the central bank's move to block payment apps from offering crypto services will make it more challenging for citizens to access crypto assets and conduct transactions.

Bitcoin, in particular, has seen a surge in demand in Argentina, with its value at all-time highs when priced in the Argentinian peso. The ban on crypto operations by payment service providers may dampen the enthusiasm for Bitcoin and other crypto assets in the country, leading citizens to seek alternative ways to access and transact in crypto assets.