Days after Argentina’s largest private bank Banco Galicia opened crypto trading services, the nation’s central bank cracked the whip by banning financial institutions from carrying out crypto transactions.
The central bank noted that its decision to stop crypto transactions in the entire financial sector was reached to “mitigate the risks” involved when using digital assets, such as money laundering, cyberattacks, and high volatility.
Financial institutions will only be allowed to finance investment, consumption of goods and services, and production. Argentinians, therefore, will lose opportunities to undertake crypto operations through banks as the blanket ban on unregulated digital assets takes effect.
Recently, Banco Galicia rolled out the new service based on growing demand. It was to enable users to buy, send, and receive Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), and USD Coin (USDC).
To tame runaway inflation, Argentinians have been seeking shelter in crypto.
This can be illustrated by the fact that Argentina is among the world’s top 10 nations with the highest crypto adoption rates. Therefore, the latest development is a big blow.
With annual inflation rates surging by more than 50%, crypto exchange Lemon Cash had stipulated that it would roll out three million Visa crypto cards earlier this year.
Franco Bianchi, the chief marketing officer at Lemon Cash, said:
“Latin America is a good place for these services. Several of the countries have unstable economies and devalued currencies, and the people seek access to cryptocurrencies as a refuge.”
Economists speculate that the inflation rate on Argentinian soil will hit 55% this year from the current 50.7%.
Therefore, the crypto ban will undermine Argentinians because they were using cryptocurrencies as hedges against a cyclical economic crisis that includes a recession, hyperinflation, and repeated currency devaluations.
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