In Argentina, mired in a vicious cycle of hyperinflation and the continuous devaluation of its currency, the policies of President Javier Milei, who came to power, to relax cryptocurrency regulations have become a key part of his radical economic reform blueprint. This policy not only led to explosive growth in Argentina's cryptocurrency market but also allowed it to leap to become the second-largest cryptocurrency market in Latin America within just one year — according to cryptocurrency data analysis platform Chainalysis, from July 2023 to June 2024, the country's cryptocurrency trading volume exceeded $91 billion, an increase of over 180% compared to the same period before the policy adjustment, with mainstream cryptocurrencies like Bitcoin and USDT accounting for more than 75% of the trading volume, becoming an important tool for the public to hedge against inflation and avoid exchange rate risks.
From the perspective of specific regulatory measures, the Milei government's reforms exhibit the characteristic of "parallel regulation and openness." On one hand, the government has introduced clear registration guidelines for virtual asset service providers (VASP), requiring all cryptocurrency exchanges, wallet service providers, and others operating in Argentina to submit qualification applications to the Argentine Securities Commission (CNV) and the Central Bank by June 2024. As of now, more than 40 local and international VASP have completed registration, including the Argentine branch of the globally renowned exchange Coinbase. On the other hand, anti-money laundering (AML) and know your customer (KYC) rules fully align with the Financial Action Task Force (FATF) standards, requiring VASP to report large transactions (accumulating over $10,000 in a single month) in real-time and establish a customer risk assessment system. While this measure has improved market compliance, it has also increased operational costs for small and medium-sized service providers. By mid-2024, eight small local exchanges have been forced to exit the market due to their inability to meet compliance requirements.
Meanwhile, the tax amnesty program launched by the government has become an important driver for stimulating transparency in the cryptocurrency market. This program allows investors to voluntarily declare previously unregistered cryptocurrency assets before December 31, 2024, and pay only a "compliance tax" of 3% based on the asset's market value to bring the assets into the legal regulatory framework. According to data from the Argentine Tax Administration, as of September 2024, more than 120,000 investors have participated in the declaration, with a total declared asset market value of $4.7 billion, of which about 60% is held by retail investors in Bitcoin and USDT. This data not only reflects the market's recognition of compliance but also indirectly proves the popularity of cryptocurrencies among the Argentine public. According to a report from the Argentine research agency Opina in the second quarter of 2024, 33% (about 12 million people) of the population aged 15 to 65 use cryptocurrencies daily, mainly for purposes including cross-border remittances (42%), daily consumption payments (28%), and asset preservation (25%). Some supermarkets and gas stations have even begun to accept cryptocurrency payments directly.
However, behind the seemingly prosperous market lies high risks stemming from regulatory uncertainty and macroeconomic fluctuations. The most typical case is the crash of the LIBRA token (named after the stablecoin originally planned by Facebook but is a local Argentine project). In March 2024, Milei stated in a public speech that he "supports the development of local stablecoins and sees LIBRA as a complementary tool for the internationalization of the peso." This statement directly propelled the price of the LIBRA token from $1.2 to $3.8 within three days, with its market capitalization briefly exceeding $2 billion. However, Congress initiated an investigation into the issuer of LIBRA on the grounds of "not approved by the financial regulatory authority and potentially causing systemic risks" and called for a suspension of token trading. Coupled with market concerns about a shift in regulatory policy, the LIBRA price plummeted by 85% to $0.57 within a month, trapping many retail investors, some of whom even initiated collective lawsuits demanding the government take responsibility for losses caused by the chaotic regulatory signals.
In addition to policy risks, Argentina's ongoing political and economic fluctuations further exacerbate the instability of the cryptocurrency market. In May 2024, the pension reform bill proposed by the Milei government encountered setbacks in Congress, leading to intensified contradictions between the ruling and opposition parties. Market confidence in the government's ability to govern declined, with the peso depreciating by 4.2% against the dollar in a single day. On that day, Bitcoin trading volume in the Argentine market surged by 37%, with a price premium of 8% compared to the international market, reflecting that the crisis of trust in the local currency persists. Furthermore, although the Central Bank of Argentina has somewhat relaxed foreign exchange control policies, the monthly individual foreign exchange purchase limit remains capped at $200. This policy indirectly promotes underground cryptocurrency trading. According to local media reports, some illegal exchange points complete large foreign exchange transfers through cryptocurrencies, with single transaction amounts reaching hundreds of thousands of dollars. This not only undermines the effectiveness of regulatory policies but also provides space for illegal activities such as money laundering and capital flight.
In the long run, the Milei government's cryptocurrency regulatory reforms are essentially a "high-risk gamble" following the failure of Argentina's traditional economic policies. If it can attract international capital through market openness and stabilize the credibility of the local currency, cryptocurrencies might become a "booster" for economic recovery. However, if regulation spirals out of control and risks explode, it could not only exacerbate turmoil in the financial system but also further erode the government's credibility. Currently, the market is closely watching the upcoming vote in Congress in October 2024 on the (virtual asset regulatory framework bill), which will clarify the legal status of cryptocurrencies, tax standards, and cross-border transaction rules. The final outcome of this bill will be a key variable determining the future direction of the Argentine cryptocurrency market.
