The Central Bank of Argentina prohibits banks from offering cryptocurrencies to customers

The Central Bank of Argentina prohibits banks from offering cryptocurrencies to customers - shutterstock 2056876652The pro-crypto nation Argentina, which has one of the highest inflation rates in the world, at over 50%, has now left the crypto community in the country in dismay.

Just days after two private banking giants in Argentina, Banco Galicia and Brubank, launched cryptocurrency trading for assets including bitcoin (BTC), ethereum (ETH), USD Coin (USDC), and ripple (XRP); the country's central bank has flatly refused lenders to offer cryptocurrencies to customers.

BCRA discourages the use of crypto assets

The Central Bank of the Argentine Republic (BCRA) announced Thursday, asking its lending banks to stop offering cryptocurrencies to customers. The BCRA has made it clear that crypto assets are neither regulated by the national authority nor authorized by the central bank.

The move was ordered by the board of directors of the central bank. The statement read:

"[The measure] seeks to mitigate the risks associated with transactions with these assets that could be generated for users of financial services and for the financial system as a whole."

This has left recent cryptocurrency newcomers to the country, Banco Galicia and Brubank, to perhaps withdraw from their previous announcements about allowing crypto purchases. 

However, the central bank does not appear to embrace the demand for crypto among Argentines. Given the country's high inflation rate, residents have increasingly turned to Bitcoin as investment and to cover rising inflation.

According to a cryptocurrency support company, TripleA, it is estimated that "over 1,3 million people, 2,94% of Argentina's total population, currently own cryptocurrencies."

Because of the highly volatile nature of cryptocurrencies

The Central Bank of Argentina reported that it wants to focus on the activities of financial entities aimed at "financing the investments, production, marketing, consumption of goods and services required by both domestic demand and exports".

Additionally, the bank has declared the highly volatile nature of cryptocurrencies, cyberattacks, money laundering and the use of cryptocurrencies for terrorist financing, and potential non-compliance with exchange regulation as possible threats substantiating the ban. 

Banning lenders from offering crypto services comes a month after the International Monetary Fund (IMF) approved a $ 44 billion loan to Argentina to "discourage the use of cryptocurrencies."