The crypto industry shows its darkest side in Argentina

Key facts:
  • App users should pay attention to the regulatory landscape to avoid surprises.

  • The message goes one way, and the actions go the other way.

Taking advantage of the fact that there is a countdown underway to implement regulation on cryptocurrency exchanges, the Argentine Fintech Chamber (CFA) deployed an operation, in broad daylight, with the aim of erecting entry barriers and maintaining control of the market through regulations.

The main apps dedicated to the buying and selling of bitcoin (BTC) and cryptocurrencies in Argentina are showing a little-known face. Far from inspirational messages, full of color and jovial language, with references to revolutions and connecting with the world, Companies in the sector, through the CFA, revealed their intentions to regulatory capture a thriving and dynamic market like fiat entrance ramps.

On these days, A delegation from the Financial Action Task Force (FATF) is in Argentina evaluating regulations on anti-money laundering and terrorist financing., and the implementation of its cryptocurrency guidelines. In practice, the FATF is the architect of the global financial surveillance system. And to comply with the organization’s demands, under the threat of being included in a “gray list”, Argentine politics is preparing to comply with all FATF requirements. With profit.

The new regulation imposes on “all human or legal persons – incorporated in the Argentine Republic or of foreign origin – that carry out” the habitual purchase or sale of “virtual assets” the registration with the National Securities Commission (CNV) and compliance with onerous regulatory requirements which mainly affect smaller companies and independent money changers.

In this way, the main companies in the sector, whose founders do not miss the opportunity to promote the use of “decentralized assets”, try, through a classic maneuver in Argentina to capture a market, relying on a distortion of the FATF requirements, or interpreting them in the most benevolent way for the international organization.

Regulatory captures occur when an interest group focuses its efforts on approving regulations that protect its position, modifying market dynamics. It goes from being governed by the competition and individual decisions of tens of millions of people, to a system in which winners and losers are selected by the signature of a bureaucrat who establishes laws in favor of privileged companies.

In this case, large firms that can support the salary of one or more lawyers and accountants in the compliance They will be the ones that will be able to comply with the regulations that are about to be approved in Argentina. Independent exchangers, small physical exchange houses distributed throughout the country and P2P sellers will be harmed by this regulation. In no case can a law stop their activity, but it will push them to operate in a clandestine market.

Enemies of privacy

Some companies are known for taking principled stances regarding their users’ privacy. Apple, for example, had a dispute with the FBI in 2015, when it legally resisted complying with court orders ordering it to collaborate with the state agency in opening the iPhone of a terrorist who opened fire at an NGO in San Bernardino, California. . In Argentina, the exchanges are also principled, but they follow other principles than those proclaimed by their founders and CEO: the opposites.

Instead of adopting a pro-market stance, like the current climate in the country, they go further and propose providing a special tax status to the private keys held by the exchanges, generating a tax benefit compared to those who opted for custody of their own coins.

Specifically, it proposes to “exclude from the Personal Property Tax the holdings of virtual assets that, as of December 31 of each year, are stored and/or guarded by” an exchange regulated in Argentina, which is registered with the National Commission. of Securities, a requirement that does not exist today. In addition, it aspires to be in a privileged position compared to virtual and physical P2P commerce, by proposing to “exempt from Income Tax” profits and returns with “virtual assets”, as long as a regulated exchange in Argentina intervenes.

With this proposal, The CFA seeks to discourage individual custody of bitcoin and cryptocurrencies, with the excuse that other assets, such as cash, if they are deposited in a bank on the last day of the year, are exempt from paying the Personal Property Tax. Far from being an “intelligent and progressive” regulation, as it says in the statement, it is a condescending attitude that is not designed with the best in mind for its users but for their businesses.

And it is not bad that it is so. As long as state mechanisms exist that allow it, entrepreneurs without ethical remorse will try to capture the market.

The problem is the contradiction that exists between the message transmitted by the brands and the message transmitted by their Institutional Relations departments. This is exposed when, for example, the public policy leader of an international exchange, but with operations in Argentina and membership in the Fintech Chamber, tells Criptonoticias that “other prevention mechanisms must also be incorporated” such as the “rule of trip”, which would require reporting about the recipient of transactions from exchanges.

While the message goes one way, the actions of these companies go the opposite way.

What’s coming

Far from being a regulation that benefits the market, what will be approved in the next few hours or days represents the complete opposite.

It generates bureaucratic obstacles for new companies, excludes independent exchangers without the capacity to support a legal structure to comply with new regulations, creates greater friction for opening accounts and carrying out transactions, exposes users to central points of failure by discouraging individual custody, and demonstrates the power of lobby of the industry to make laws tailored to them.

This episode reinforces the importance of controlling private keys and owning your bitcoin. Despite being a relatively new sector, exchanges have shown that they maintain the old vices of regulatory hunters. If they are not your keys, your coins are under the control of companies that would not hesitate for a second to hand over the holdings of their users, if that means ingratiating themselves with the needs of the government in power.

For now, a regulatory proposal compatible with free competition and innovation in the sector will be very far away. It will no longer be correct to call the users of these apps “customers.” Now, under the new regulatory framework, they are now in captivity so it would be more accurate to call them “captives.” Of course, there will always be options to free yourself.

Disclaimer: The views and opinions expressed in this article belong to its author and do not necessarily reflect those of CriptoNoticias.

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