Argentina's Crypto Usage Surges 294% Amid Economic Downturn

Argentina has seen a significant rise in cryptocurrency usage, with over 1.3 million people currently using crypto, representing 2.94% of the population. This trend has been on the rise since 2019, with a growing acceptance of Bitcoin and other alternative assets. The country's strict controls over foreign currencies, aimed at protecting against inflation and preventing the transfer of foreign currency outside its borders, have also contributed to the adoption of cryptocurrency.

Argentina has positioned itself as a regional leader in the cryptocurrency space. However, cryptocurrencies are not considered legal tender in the country, as they are not issued by the government's monetary authority. The Central Bank of Argentina holds the sole authority to issue legal currency.

In 2022, Argentina's central bank implemented strict regulations on cryptocurrency. On May 9, 2022, the central bank banned unregulated crypto transactions in traditional banks, a move that was reportedly influenced by pressure from the International Monetary Fund (IMF). This ban followed an earlier decision on May 5, 2022, where the Central Bank of Argentina Republic (BCRA) prohibited banks from offering services for any digital assets not regulated by the central bank.

Despite these regulatory challenges, the adoption of cryptocurrency in Argentina continues to grow. According to a survey by Americas Market Intelligence, more than one out of ten Argentinians have some form of crypto investment, with an additional 18% expressing interest in buying crypto in the future. The town of Sorradino, with a population of 6,000, is even exploring crypto mining to fund infrastructure upgrades, highlighting the growing interest in digital currencies.

The Argentinian Securities regulator, the National Securities Commission (CNV), has taken steps to streamline the arrival of new fintech and crypto-based investment instruments to the market. However, there are currently no specific regulations on the issuance, exchange, or use of cryptocurrency in Argentina. The CNV has issued warnings about the risks of initial coin offerings (ICOs) and has clarified that certain ICOs may be subject to its control based on their characteristics and structure.

Cryptocurrency mining is permitted in Argentina and is popular due to the country's low-cost, subsidized electricity. The town of Serodino, for example, has begun purchasing graphic cards and mining equipment to generate income via crypto mining, which is then converted into Argentina's fiat currency to finance infrastructural renovations.

Taxation of cryptocurrency in Argentina is based on residency and the source of income. Gains obtained by resident individuals from the disposal of digital currency fall under a 15% scheduled tax, while legal entities are taxed at a rate ranging from 25 to 30 percent. Worldwide assets of an Argentina's individual resident are subject to personal tax at a rate varying from 0.5% to 1.25% based on overall asset value exceeding tax allowance. The transfer or exchange of virtual currency is not subjected to Value Added Tax in Argentina.

Historically, Argentina has taken various steps to regulate cryptocurrency. In November 2021, the country updated its "check tax" rules to clarify that crypto exchanges are not exempted. In April 2020, the Central Bank of Argentina collaborated with IOV labs, a Bitcoin startup, to work on a blockchain-based payment network. In November 2019, Argentina introduced new tax rules and included 11 new cryptocurrencies in its authorized list allowed to trade. However, in November 2019, the Central Bank banned the purchase of Bitcoins using credit cards to preserve the country’s foreign exchange reserves.

Argentina's economic downturn, characterized by high inflation and a deflating currency, has fueled the crypto craze in the country. The shortage of US dollars has also contributed to the growth of the cryptocurrency sector, with the number of user accounts for investing in cryptos multiplying by ten. Despite the regulatory challenges, cryptocurrency remains legal in Argentina and is regulated for taxation and anti-money laundering purposes.