In Argentina, the government’s attitude towards cryptocurrencies has been limited to the issuance of regulations related to their taxation and the prevention of money laundering and financing of terrorism.
The Argentine government has not implemented specific regulations on the exchange, issuance or, in general, the use of such digital assets, adopting an attitude of observation towards the development of the general impact of cryptocurrencies on the Argentine market.
In Argentina, cryptocurrencies such as Bitcoin are defined by the Financial Information Unit (Unidad de Información Financiera, “UIF” after its Spanish acronym) 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: (i) tangible; and (ii) intangible.
As opposed to those that have 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 may be considered as “money” (dinero), thus excluding any possibility of including cryptocurrencies in such category.
In connection with the possibility of considering cryptocurrencies as “currency” under Argentine law, section 30 of the Argentine Central Bank’s Charter (Law No. 24.144, the “Charter”) provides a definition that excludes any type of instruments that: (i) have no legal tender directly or indirectly imposed by its issuer; or (ii) are not issued with nominal values lower than 10 times the amount of the highest national money bill in circulation. Thus, so far, this provision excludes the possibility of considering several cryptocurrencies as “currency” (moneda) under Argentine law. Moreover, extensive interpretations of Section 30 of the Charter are prohibited due to its monetary public order nature.
In this regard, the Central Bank issued in May, 2014, a non-binding press communication stating that virtual currencies are neither issued by itself nor any other international monetary authority and, thus, have no legal tender and are not guaranteed by any government.
Nevertheless, we have not yet seen any local precedents or governmental decisions/communications in connection with any cryptocurrency issued by foreign authorities.
Government backing for cryptocurrencies
In Argentina, there are no cryptocurrencies backed by either the Argentine Government or the Argentine Central Bank.
Cryptocurrencies are not prohibited in Argentina. For the time being, the only specific regulations related to cryptocurrencies are UIF’s Resolution 300/2014 (hereinafter, “UIF Resolution”), which implements additional reporting obligations to certain obliged subjects under the Anti-Money Laundering Law No. 25,246 (hereinafter, the “AML Law”) (please see “Money transmission laws and anti-money laundering”, below), and Law No. 27,430 (hereinafter, the “Tax Reform Law”) (please see “Taxation”, below).
There is no specific regulation applicable to the sale of Bitcoin or other tokens under securities laws or commodities laws in Argentina.
Considering the lack of a central issuing authority, bitcoins cannot be classified as securities. Under Argentine law, securities are essentially negotiable instruments to 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, such as of the United Kingdom, the USA, China, Hong Kong and Brazil, the Argentine Securities and Exchange Commission (hereinafter, the “CNV” after its acronym in Spanish), issued a communique on Initial Coin Offerings (hereinafter, “ICOs”) to warn investors of the potential risks.
The CNV clarified that ICOs would not, in principle, be subject to capital markets’ regulations. Nevertheless, it also stated that certain ICOs may be subject to the control of the CNV, depending on their structure and particular characteristics.
The communique also warned investors about the following potential risks associated with ICOs: (a) lack of specific regulations; (b) price volatility and liquidity risks; (c) probability of fraud; (d) inadequate access to relevant information; (e) early stage of the projects; (f) probability of technological and infrastructure failures; and (g) transnational nature of transactions involving ICOs.
Although the CNV states that ICOs are not – in principle – subject to specific CNV control, the communique clarified that claims may be filed with the CNV in those cases where there is a suspicion that an ICO could be fraudulent.
Among the amendments introduced by the Tax Reform Law, the taxable income derived from the commercialisation of “digital currencies” was incorporated to the Income Tax Law (hereinafter, the “ITL”). One of the main objectives of the tax reform is to tax financial income.
Neither the Tax Reform Law nor the ITL provide a definition of digital currencies, or the scope that such concept comprises. Please note the corresponding regulations of the Tax Reform Law have not been issued yet. We understand that the meaning of such concept should be the same as the one of “virtual currencies” defined by the UIF Resolution and, therefore, such Resolution should apply to cryptocurrencies.
The ITL also determined that if the issuer of the cryptocurrencies is domiciled in Argentina, then an Argentine-sourced income would be generated as a consequence of the exchange thereof.
Provided that cryptocurrencies fall within the definition of intangible assets, the exchange of cryptocurrencies should not be impacted by Value Added Tax.
In general, and in addition to the aforementioned examples, cryptocurrencies must be taxed like any other intangible asset.
The AML Law lists a number of persons – including financial entities, broker-dealers, credit card companies, insurance companies, public notaries, and certain government registries and agencies – that have, among other things, specific reporting obligations under the AML Law (Obliged Subjects) and provides for certain general obligations, including: applying KYC procedures; reporting to the UIF any transaction suspected of money laundering (ML) or terrorism financing (TF); and abstaining from disclosing to their clients or third parties the activities performed in compliance with that statute.
As explained above, one of the few regulations on cryptocurrencies in Argentina is the UIF Resolution, which requires most of the Obliged Subjects under the AML Law to report all the transactions performed with cryptocurrencies, regardless of their amount.
Following the Financial Action Task Force’s guidelines, the UIF also warns Obliged Subjects about the risks involved in transactions with cryptocurrencies. In so doing, the UIF also requires the Obliged Subjects listed in the UIF Resolution to strictly monitor any transactions performed with cryptocurrencies by their clients.
There are currently no “sandbox” or other programmes intended to promote research and investment in cryptocurrency in Argentina.
Except for the tax (please see “Taxation”, above) and anti-money laundering (please see “Money transmission laws and anti-money laundering”, above) regulations, Argentine regulatory authorities have adopted a wait-and-see strategy in connection with cryptocurrencies.
Nevertheless, the Argentine Central Bank has created several research groups – among which there is a group specifically dedicated to cryptocurrencies and blockchain technologies – integrated by members of both public and private entities with the aim of analysing potential regulatory modifications to enable the use of new technologies within the financial services industry.
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 No. 26,831 (hereinafter, the “CML”), regulated entities subject to the CNV’s control – such as investment managers, investment advisors 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 to operate with such digital assets.
Mining Bitcoin and other cryptocurrencies is permitted in Argentina, although there are currently no specific regulations on such activity.
There are no border restrictions or obligations to declare cryptocurrency holdings in Argentina.
There are no reporting requirements for cryptocurrency payments made in excess of a certain value.
Currently, the only specific reporting requirements in connection with cryptocurrencies are regulated by the UIF Resolution (please see “Money transmission laws and anti-money laundering”, above) and the Tax Reform Law (please see “Taxation”, above).
Following our explanations in “Government attitude and definition” above, cryptocurrencies must be treated as intangible assets for the purposes of estate planning and testamentary succession. Such treatment may potentially change in the future in connection with tokens issued through ICOs, subject to the CNV’s view on their legal nature under the CML.