Navigating the New Landscape of Cryptocurrency Regulation in Argentina

Argentina has recently initiated significant reforms in its cryptocurrency regulation landscape, primarily driven by concerns about money laundering and the need for a structured legal framework. This shift comes amidst a backdrop of increasing cryptocurrency adoption in the country, largely due to economic instability, including high inflation and currency devaluation.

Background

Historically, Argentina has been a leader in cryptocurrency adoption in Latin America, with many citizens turning to digital assets to safeguard their wealth against inflation and restrictive currency controls. As of 2023, Argentina was reported to have conducted approximately $85.4 billion in cryptocurrency transactions, positioning it as one of the largest crypto markets globally. However, until March 2024, the country lacked a formal regulatory framework for cryptocurrencies, which led to a fragmented regulatory environment.

Introduction of Law N°27,739

On March 15, 2024, Argentina passed Law N°27,739, which marks a pivotal moment in regulating crypto assets. This law introduced substantial reforms aimed at preventing money laundering and terrorist financing. A key feature of the legislation is establishing a regulatory framework for Virtual Asset Service Providers (VASPs), which now have specific obligations regarding anti-money laundering (AML) practices.

Key Provisions of Law N°27,739

1. Creation of VASP Category: The law defines VASPs broadly, encompassing individuals and entities involved in activities such as exchanging virtual assets for fiat currencies, transferring virtual assets, and providing custody or administration of these assets.
2. Mandatory Registration: VASPs are now required to register with the Argentine National Securities Commission (CNV). Registration criteria include:
   • Operations using any “.ar” domain.
   • Commercial agreements allow local receipt of funds from Argentine residents.
   • Advertising or targeting Argentine residents.
   • Generating over 20% of total turnover in Argentina from activities requiring VASP registration.
3. Online Registration Process: The registration process is streamlined, requiring only basic legal and commercial information, without the need for technical details. However, entities based in jurisdictions deemed non-cooperative for tax transparency are prohibited from registering.
4. User Protection and Transparency: The law emphasizes user protection, information security, operational safety, and the promotion of good corporate governance practices among VASPs.

🇦🇷Argentinians Turn to Crypto.
With inflation at 276%, Argentinians are shifting to cryptocurrencies like Tether (USDT) to escape the devaluing peso. Despite risks and minimal regulation, crypto adoption is soaring!#Crypto #Argentina #Inflation #EconomicCrisis pic.twitter.com/E4vMBxOCvd

— SingularityU South Africa (@SUSouthAfrica) July 18, 2024

Regulatory Authority and Future Developments

The CNV has been appointed as the primary regulatory authority responsible for overseeing the crypto industry and establishing a comprehensive regulatory framework. Following the enactment of Law N°27,739, the CNV issued General Resolution N°994 on March 22, 2024, which further delineates the registration requirements for VASPs.In addition to the regulatory framework, the Argentine government has also introduced a fiscal package that includes a tax amnesty for individuals declaring up to $100,000 in previously undeclared assets, including registered crypto assets. This move aims to alleviate pressure from the Financial Action Task Force (FATF), which has expressed concerns about Argentina’s money laundering practices and has threatened to place the country on its grey list, potentially impacting foreign investment and economic stability.

Challenges and Considerations

Despite these regulatory advancements, challenges remain. The Argentine government has intensified its crackdown on crypto-related crimes, conducting multiple raids and arrests linked to money laundering and illegal activities in the crypto space. Additionally, the CNV’s current registration does not imply a license or oversight of VASP activities, indicating that further regulations are expected to address operational compliance and consumer protection in the future.

Conclusion

Argentina’s move towards regulating cryptocurrencies represents a significant step in establishing a formal framework that addresses both the opportunities and risks associated with digital assets. As the country navigates this evolving landscape, ongoing collaboration with international regulatory bodies like the FATF will be crucial in ensuring compliance and fostering a secure environment for cryptocurrency transactions. The anticipated comprehensive legal framework for VASPs and crypto assets will likely play a vital role in shaping the future of cryptocurrency in Argentina.