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Argentina Crypto: Adoption, Regulation & Tax

Argentina has had its share of fiscal crises. Think back to the great problems of the late 80s, and 90s, and, coming up to date, many still remain. Those times when bank accounts were frozen and inflation raged have perhaps nurtured many people over past years into becoming crypto acolytes, turning away from relying upon the traditional currency.

The need to keep money in safe currencies, as assets, or in havens is what has probably given Bitcoin and cryptocurrency its huge popularity with Argentinians keen to maintain some value in the face of high inflation. The country has been a thriving crypto economy, with an overall cryptocurrency market valued at nearly $70 billion. Even with price volatility, the crypto economy remains healthy, but proposed tax legislation laws may soon apply. At the time of writing, Argentina has brought updated tax burdens to bear on transactions and exchanges. This means a tax on crypto sales and purchases of up to 0.6% levied through banking debits and credits.

Crypto exchanges have predominated over the last few years, and the country’s decision to allow employees to be paid up to 20% in bitcoin or other cryptocurrencies has had a wide take-up from the workforce looking to avoid inflation eroding their earnings.

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Argentinian ICOS and start-ups

Fintech and blockchain innovation is thriving in Argentina, and the country’s hub of innovation has been established to capture and promote that enthusiasm. The objective is to promote fintech and blockchain start-ups in a guided and regulated strategy whereby enterprises and organizations are matched with Argentinean regulators early.

Compliance and credibility are the names of the game according to Argentina’s National Securities Commission CNV. It also is intended to speed up the introduction of innovative services and products and encourage the interaction of innovative agencies within the financial sector. The introduction of the hub in Argentina is just one more example of how Latin American countries are embracing crypto and blockchain technology – or looking to catch up with its developments.

Aside from the introduction of the hub, the country’s blockchain community is on a roll, with IT and software leading the way and predicted to transform the country into one of the most hi-tech countries in Latin America. Indeed, the value of Argentina’s IT  industry is estimated at $7,33 billion*

Argentina’s crypto and financial community

Argentina’s economy is a prime breeding ground for the crypto world with light regulation and tenaciously high inflation. The ‘blue dollar’ is a costly option for many who want to save, and using cryptocurrencies to convert their pesos into dollars is a way of conducting peer-to-peer transactions more economically. Up to now, the fintech sector has been left largely unregulated, but Central Bank investigations into a number of fintech firms for allegedly allowing depositors to earn interest on their crypto holdings may mark the start of a new regime of legislation. That said

Bitcoin mining In Argentina 

Argentina has plenty of mining activity and the electricity available to make it worthwhile – it’s also permitted, needless to say, but growing concerns over energy usage are becoming louder. With the Peso constantly being eroded by inflation and devaluation and relatively low energy costs of electricity, Argentina has a head start on other economies in South America for home-based crypto miners and is attractive for overseas miners too. Bitfarms, a Canadian crypto mining company located in Patagonia is one of the largest of its kind in Argentina. Argentina has over 20 crypto-farms already and there are, as yet, no specific regulations regarding this activity. Whereas in many parts of the world, green concerns are having the effect of pressurizing miners to adopt green energy or not mine at all, in Argentina, the green lobby is less effective in a country where financial needs are running the show.

Bitcoin exchange transparency in Argentina

Cryptocurrencies are not legal currency although they may be considered money, and although Argentina has long deployed firm controls over foreign currencies, the country had been an enthusiastic early adopter of crypto. That said, up until now, the country’s priority regulations with respect to cryptocurrencies have been in the areas of taxation and anti-money laundering and a whole lot of new legislation is being considered or applied in these areas.

Argentinian banks and Bitcoin

Up until the time of writing, Argentinian banks were leading the mainstream establishment’s foray into crypto. Most notable was Brubank, one of the first digital banks in Argentina to be recognized by the country’s central bank, offering Bitcoin buying services on its app. Brubank is not the first, however, and hot on its heels, was Banco Galicia, which in May 2022 was already selling Bitcoin investments via its app, following demand for the service. Such services are provided in partnership with agencies outside of the country, as banks are unable to provide these services on their own and therefore, the holding wallets are not protected by Argentinian law.

Banco Galicia joins a growing number of traditional banks worldwide moving into digital assets. Last month, Commerzbank, Germany’s fourth-largest bank, confirmed it wants to offer digital assets custody and exchange services to clients, focusing initially on institutional customers. However – spoiler alert – almost at the same time as Banco Galicia made its crypto purchasing service public, the Argentinian government unexpectedly announced a ban on banks being able to facilitate crypto purchases for customers, along with a halt to all financial institutions being allowed to offer digital assets. The Central Bank’s monetary authority has banned operations that allow bank clients to purchase crypto including asset types whose profitability is dependent upon crypto price fluctuations. If this all seems one step forward and two backward (or the other way around) it simply means a coherent forward-thinking strategy has yet to be put in place, leaving the governing bodies reactive rather than proactive on crypto developments.

Crypto regulation in Argentina

Bitcoin and, increasingly, stablecoins pegged to the US dollar, are seen by users as a means to achieve some degree of stability within the traditional economy – at least until the latest dramatic price falls have run their course. Overall, however, crypto has been seen as a means for hedging against high inflation, which in Argentina has been running at eye-watering high rates of up to 50% As with Mexico and Brazil, the government has taken a relatively ‘hands-off’ approach to cryptocurrency with no specific regulation apart from warnings and exhortations to exercise caution but this is changing.

In 2022, however, things have changed and many countries around the world – including Argentina – have begun firmer clampdowns on a number of issues surrounding crypto, principally transparency, AML, and the use of crypto for payments. As such, despite its early enthusiasm for the industry, Argentina’s central bank tightened up on cryptocurrencies, and now prohibits financial institutions in the South American country from offering clients any operations involving unregulated digital assets.

The monetary authority banned operations that allow bank clients to purchase crypto, just days after two large institutions announced they would let clients buy Bitcoin and other digital currencies. The ban also includes assets whose returns are determined by the fluctuations of cryptocurrencies.

Taxes in Argentina

Tax on bitcoin

As we have seen with all Coincub’s ranking countries, regulation and even taxation actually helps promote confidence and boost a country’s crypto standing. That said, Argentina is looking at new laws to tax cryptocurrency users across exchanges. This tax would require the payment of income tax on crypto operations by both companies and individuals. It covers the exchange agent who acquires crypto on behalf of a client for commission in return; exchange platforms and traders. Other users will be subject to a tax of 0.25% where profit comes from the commercialization of goods and services and receive their payments from abroad.

Whilst such taxation may be unpopular with individuals, commercial organisations are generally favourable towards the creation of a Chamber of Crypto Companies. Despite seeing the need for a regulatory framework that promotes crypto, they’re not so hot on new taxes which could stem the flow of foreign investments.  It’s likely that bypassing taxes through using Person to Person platforms which operate outside of controlling agencies will rise.

The assets of individuals overseas, but resident in Argentina are subject to personal assets tax at a rate that varies from 0.5 per cent to 1.25 per cent. This depends on the overall value of the assets exceeding the tax allowance (2 million pesos). In the case of assets located abroad, a sliding scale of 0.7 per cent to 2.25 per cent tax applies.

Hard on the heels of the taxation initiatives mentioned above, is the Argentinian Senate’s approval of a bill that would allow the taxation of non-declared assets held in foreign countries by citizens of the country. It includes stocks, properties, bonds but also crypto holdings. Obviously the government needs to rake in some money somehow, to pay off its enormous debts toits old friend the IMF. The collected funds would be managed by the Economy Ministry and, if approved, citizens will have to pay up to 50% on these assets – gaining disclosure on who owns what abroad is another matter.

Overall, any sale of crypto offers the potential for taxation, and losses arising from those transactions can be offset. Losses from crypto however, can’t be offset against  income from other sources. The transfer or exchange of digital currency is not subject to value added tax.