An extract from The Virtual Currency Regulation Review, 3rd Edition
Introduction to the legal and regulatory framework
Argentina is a regional leader in the adoption of cryptocurrencies, and is still making inroads in this regard. As a result of economic instability and foreign exchange restrictions, Argentina became one of the earliest adopters of cryptocurrency in Latin America (and the world) in an effort to protect its savings against inflation and to overcome the prohibition on purchasing and transferring foreign currency abroad.
Cryptocurrencies are not prohibited in Argentina, and are therefore legal. Nevertheless, the government has issued regulations regarding cryptocurrencies related to taxation and the prevention of money laundering and the financing of terrorism.
The government has not implemented specific regulations on the issuance, exchange or, in general, use of cryptocurrencies, instead choosing to observe ongoing developments regarding the impact of cryptocurrencies in the Argentine market.
Securities and investment laws
There is no specific regulation applicable to the sale of cryptocurrencies or other tokens under securities laws or investment laws in Argentina.
Given the lack of a central issuing authority, Bitcoins cannot be classified as securities. Under Argentine law, securities are essentially negotiable instruments into which their issuers incorporate credit rights. Nevertheless, this conclusion may not be extended to other cryptocurrencies (tokens) issued by a centralised entity.
Following the example of securities and exchange commissions in other parts of the world, the National Securities Commission (CNV) issued a communiqué on initial coin offerings (ICOs) to warn investors of their potential risks.
The CNV has clarified that ICOs would not, in principle, be subject to regulations regarding the capital markets. Nevertheless, it has also stated that, depending on their structure and particular characteristics, certain ICOs may be subject to the control of the CNV.
The communiqué further warns investors about the following potential risks associated with ICOs:
- a lack of specific regulations;
- price volatility and liquidity risks;
- the probability of fraud;
- inadequate access to relevant information;
- the early stage of projects;
- the probability of technological and infrastructure failures; and
- the transnational nature of transactions involving ICOs.
Although the CNV states that ICOs are not, in principle, subject to specific CNV control, the communiqué clarifies that claims may be filed with the CNV in cases where there is a suspicion that an ICO could be fraudulent.
Although there are no specific prohibitions, given the current lack of certainty in connection with the possibility of considering certain cryptocurrencies as securities under the Capital Markets Law,2 regulated entities subject to the CNV's control, such as investment managers, investment advisers and fund managers, tend not to operate with such assets.
Additionally, the formal requirements for the operational activities of such players have not been designed to address cryptocurrencies. Thus, several regulations may act as practical restrictions that hinder the possibility of operating with such digital assets.
Banking and money transmission
In Argentina, cryptocurrencies like Bitcoin are defined by the Financial Information Unit (UIF) as a 'digital representation of value that can be digitally traded and functions as a medium of exchange; and/or a unit of account; and/or a store of value, but does not have legal tender status in any jurisdiction and is neither issued nor guaranteed by any government or jurisdiction'.
The Argentine Civil and Commercial Code (the Civil Code) determines that individuals and legal entities are entitled to all the corresponding rights over the assets that are part of their property. In this regard, the Civil Code classifies assets into two categories: tangible and intangible.
As opposed to those that have a physical entity, intangible assets such as intellectual property and, in general, rights do not materialise in the physical sphere. Thus, as a digital representation of value, cryptocurrencies are intangible assets that are able to form part of individuals' and legal entities' property.
Section 765 of the Civil Code determines that only the Argentine fiat currency can be considered as money, thus excluding any possibility of including cryptocurrencies in such category.
In connection to the possibility of considering cryptocurrencies as currency under Argentine law, Section 30 of the Argentine Central Bank's Charter3 provides a definition that excludes any type of instrument that has no legal tender directly or indirectly imposed by its issuer, or that is not issued with a nominal value lower than 10 times the amount of the highest national money bill in circulation. As such, to date this provision excludes the possibility of considering several cryptocurrencies as currency under Argentine law. Moreover, extensive interpretations of Section 30 of the Charter are prohibited.
In this regard, in May 2014 the Central Bank issued a non-binding press release stating that virtual currencies are not issued by itself or any other international monetary authority, and thus are not legal tender and are not guaranteed by any government. Nevertheless, there have not yet been any local precedents or governmental decisions or communications in connection with any cryptocurrency issued by foreign authorities.
The UIF differentiates between virtual currency and electronic currency, stating that the latter involves the electronic transfer of legal tender, while virtual currency transactions do not involve legal tender.