However, on December 10, 2023, a new president from a political party diametrically opposed to his predecessor assumed office, so the current situation in the regulation and limitations to cryptocurrencies may change soon.

Argentina is no exception to a global trend in cryptocurrency trading. The inflationary situation and currency devaluation that has increased in recent years have led millions of Argentinians to use digital wallets to trade cryptocurrencies. This national context and the global scenario today place Argentina as the second country in the region with the most activity in cryptocurrencies, behind Brazil, and the 13^th worldwide, reaching a total volume of $93 billion annually.

As a result, the use of cryptocurrency for hoarding or buying goods has been increasing over the years, making it an attractive financial option. However, the ex-National Government of the past four years has taken measures to discourage certain uses of cryptocurrencies, although they are not prohibited.

In the following sections, we will cover the existing regulations in Argentina so that you have a regulatory panorama, among other important issues about the current situation and the precautions to take in case you want to use cryptocurrencies in the Argentine market.

Without intending to delve into the issue, it is important to note that there is currently regulation at both the national and provincial levels, which is growing and expanding to more and more operations but discouraging certain uses.

Particularly in Argentina, as well as in those countries where access to the purchase of foreign currency is restricted and which are marked by a deep devaluation process, the use of cryptocurrencies is increasing, moving a significant amount of money to these non-traditional investments. However, the Argentine Government seeks to regulate and restrict its use to discourage hoarding in currency or foreign assets.

Regardless of the current legislation, the truth is that the change of President and political direction (since the current president has a liberal ideology) will bring about a significant shift in regulation, as indicated by Executive Order No. 70/2023, which announces and advances in economic deregulation. In this sense, these norms may soon be altered or even rendered ineffective.

The nature of cryptocurrency

It is well known that countries have different regulations on cryptocurrencies, including whether to consider them legal tender or forbid them. For example, El Salvador has accepted Bitcoin as legal tender, while Australia recognizes cryptocurrencies as property and allows them to be used as a means of payment. In Switzerland, cryptocurrencies are considered assets and are subject to taxes such as wealth, income, and profits. Finally, most countries and transnational organizations, such as the EU, are working on regulations governing the use and nature of cryptocurrencies.

Currently, there is no uniform criterion in Argentina on what is considered cryptocurrencies. However, to regulate, limit, and tax cryptocurrencies, different definitions have been designed to discourage their use.

For example, the Central Bank of Argentina has considered cryptocurrencies to be liquid external assets, treating them to foreign currencies, deposits with financial institutions abroad, funds in investment accounts located abroad, and funds in accounts of payment service providers (PSP), etc. Under this definition, the Central Bank prevents companies or individuals with such assets from accessing the foreign exchange market if their holding of those available liquid external assets and Argentine depository certificates^[2] (CEDEAR) jointly exceed $100.000.

On the other hand, the Income Tax Law defines them as financial assets and economic resources that an individual or entity possesses, which are interchangeable and from which a future profit is expected. Under this definition, these assets are subject to taxation. In addition, the national tax authority, the Federal Administration of Public Revenues (AFIP), has characterized cryptocurrencies as a new class of financial asset, non-traditional and based on blockchain technology.

In addition to these quasi-definitions, the Central Bank and the National Securities Commission (CNV) have issued warnings and clarifications regarding the use of cryptocurrencies and what the Argentine Government currently allows and does not allow.

The Central Bank and the CNV have indicated that cryptoassets are digital representations of securities or rights that are transferred or stored electronically through Distributed Registration Technology and warn about some aspects to be considered before use:

• cryptocurrencies are not legal tender money, so their acceptance as a means of debt cancellation is not mandatory;
• cryptocurrencies are volatile assets;
• cryptocurrencies are vulnerable to operational disruptions (e.g., service continuity interruptions or system failures) and cyberattacks, so users may not have access to their holdings and, as a result, be unable to perform operations. In addition, users may suffer the loss or theft of their access keys, which could lead to the loss of the cryptoassets without the possibility of recovering them;
• there are no safeguards for cryptoassets, as deposits in virtual wallets do not have deposit insurance or the benefits that financial services users have;
• users are exposed to fraud, incomplete information, or a lack of transparency, as information provided by crypto service providers may be complex or incomplete and may not adequately disclose the risks faced by users;
• cryptocurrencies pose the risks of money laundering and the financing of terrorism and potential non-compliance with foreign exchange regulations; and
• cryptocurrency transactions are cross-border, so any conflict could fall outside the jurisdiction of the Argentine courts and authorities.

All these regulations leave us with more uncertainty than certainty. While the Argentine government declares that it is necessary to bring transparency and clear rules to the cryptocurrency market, these regulations are far from having a single criterion, and most of them could be considered as an approach to restricting the use of cryptocurrencies rather than benefiting from them. On the one hand, cryptocurrencies are taxed and considered external assets. On the other hand, in recent years, it has not been permissible to settle debts through the transfer of cryptocurrencies. Moreover, possessing such digital assets could, and still can, hinder access to the foreign exchange market.

Likewise, any outflow of funds through the foreign exchange market required prior approval by the Central Bank of Argentina, unless the client signs an affidavit stating that they did not carry out certain transactions with securities within a certain term prior to and after the date of access to the foreign exchange market (Securities Affidavit). The Central Bank never granted such approval.

The Securities Affidavit includes a list of transactions that restrict access to the foreign exchange market during a certain period,^[3] known as the 'Black-Out Term' whether these transactions are arranged directly or indirectly or on behalf of third parties. One of the listed transactions is the delivery of pesos or other local assets to any human or legal person, resident, or non-resident, related or not, receiving as prior or subsequent consideration, directly or indirectly, by itself or through a related, controlled or controlling entity, external assets, crypto-assets, or securities deposited abroad.

Financial institutions and non-financial companies that issue local cards must have the prior approval of the Central Bank to make payments abroad through the foreign exchange market for the use of such cards, when such payments originate, directly or indirectly using payment networks international, for the acquisition of cryptoassets in their different modalities. The Central Bank does not grant this prior approval.

Despite these incentives to discourage the use of cryptocurrencies, Argentines closely follow the cryptocurrency market and invest year after year. However, they are not as likely to use cryptocurrencies to pay debts or buy goods, as their protection is not guaranteed (although as we will see later, it is not so well).

Restrictions and controls on the use of cryptocurrencies

As previously mentioned, the previous Argentine Government has issued certain regulations in order to restrict and discourage the use of cryptocurrencies, essentially to prevent hoarding, as is the case with the purchase of US dollars.

One of the agencies responsible for regulating these restrictions was the Central Bank. This process began in mid-2022 when one of the largest private banks in Argentina enabled operations with certain cryptocurrencies through home banking, allowing all its customers to access Bitcoin, Ethereum, USD Coin, and Ripple. As a result of this announcement, the Central Bank issued two resolutions^[4] just three days later, prohibiting financial institutions and PSPs from allowing transactions with cryptocurrencies and any other digital assets.

This regulation limited many companies that were able to provide these services, preventing all financial institutions and PSPs regulated by the Central Bank from offering any digital asset that has returns not authorized by this body or by the CNV. This situation also prevented the purchase, sale, and use of cryptocurrencies from being in the hands of regulated sectors such as these companies, losing the possibility of controlling their use and integrating them into the traditional economy or allowing them to be used to promote the domestic economy.

On the other hand, two information regimes have been created to which certain companies are subject, forcing them to inform those who operate with cryptocurrencies in different areas. For example, the AFIP requires all entities the manage, control, or proceed with movements of assets through digital platforms (known as digital wallets) on behalf of human persons or companies to inform the AFIP if users operate with cryptocurrencies valued at ARS 200,000 (approx. $550) or higher, accounting for positive and negative balances.

However, not all restrictions or reporting regimes are derived from government policy. Certain agencies have issued warnings about the use of cryptocurrencies and the risks of their use due to constant cyberattacks.

One risk to which such assets are exposed is to be used for money laundering. Thus, the Financial Action Task Force (FATF) has issued warnings about the risk involved in the exchange of cryptocurrencies and their use in the purchase of goods and services, especially in the lack of identification of users and the use of pseudonyms. In this regard, FATF urged partner countries to adopt strengthened measures to control the use of cryptocurrencies, combating money laundering and terrorist financing. It has even issued the Guidance for a Risk-Based Approach to Virtual Currencies.

Under these FATF guidelines and warnings, Argentina has been a full member since 2000, the Financial Information Unit (UIF) has created a regime^[5] whereby obligated subjects must report cryptocurrency transactions. This body is responsible for the analysis, processing, and dissemination of financial intelligence information to prevent money laundering and the financing of terrorism.

The UIF created the Virtual Currency Operations Report where certain subjects must report monthly all operations performed with cryptocurrencies. Among these subjects are financial entities, companies engaged in the sale and purchase of vehicles, public notaries, companies that engage in gambling, and companies listed on the stock exchange.

All these regulations, warnings, and the creation of informative regimes provide a concrete overview of the current Argentine situation. While the informative regimes provide a framework for accepting the use of cryptocurrencies for various operations, their use could be considered prohibited for companies that are in a better position to control it.

Like the previous section, the regulation is dispersed, with each agency defining cryptocurrencies differently and regulating it from its own perspective.

However, to unify the criteria and enact a complete regulation on cryptocurrencies, the CNV, the Central Bank, the Argentine Chamber of Fintech, and the AFIP are working on a bill in line with the standard promoted in the EU.

Tax law: Between the regulatory gap and the prohibition of the analogical integration method

Argentina is a federal republic, meaning that each province is autonomous, each having its constitution, laws, and authorities. However, all provinces are subject to the national government, which has exclusive jurisdiction over certain matters.

Certain faculties are delegated to the Nation, while others remain in the hands of the provinces. This is relevant at the time when analyzing the tax regimes that apply to cryptocurrencies, as the specific legislative powers delegated vary from province to province.

Therefore, when carrying out any kind of transaction with cryptocurrencies, it is important to consider which of the 25 jurisdictions (the Nation, 23 provinces, and an autonomous city) you are in to analyze the tax implications under the respective tax regime in force.

At the national level, one of the taxes that affect cryptocurrencies is the Income Tax. The latest amendment, only available in Spanish here, to the Income Tax Law expanded its scope to include profits obtained from the possession or disposal of 'digital currencies.'

On the other hand, it is relevant to adopt a similar criterion in the different rules that reach cryptocurrencies, since if they are considered as goods, they could be taxed by the value added tax, which would not be applicable to them under the current criterion that considers them between a foreign currency and a financial asset.

However, the legislator's omission to pronounce on some basic and essential aspects of the tax obligation and the prohibition of applying the analogical integration method with tax laws create a need for legal certainty and legislative action to fill the resulting normative void.

Another national tax that may reach cryptocurrencies, according to the AFIP,^[6] is the personal property tax. The AFIP presumes that cryptocurrencies are intangible properties located in the country. However, the instrument by which it is established is an opinion of the agency, so it is not mandatory. For this tax to be fully applicable without doctrinal discussion, it is required that there be a normative modification for its express inclusion.

The National Tax on Bank Debits and Credits, which is paid in Argentina for credit and debit transactions in bank accounts, also reaches the movements of funds that are linked to the purchase, sale, swap, intermediation, and/or any other operation on cryptocurrencies. In addition, although this rule provides exceptions to the payment of this tax, the fact is that it also expressly provides that these will not apply when transactions are made with cryptocurrencies.

Once the most relevant national legislation has been analyzed, it is appropriate to mention the provincial regulation of the gross income tax, which is taxed provincially. Among the provinces that show certain signs of having more detailed regulation on the matter, we should name the province of Córdoba, which in its Tax Law, only available in Spanish here, determines the configuration of the taxable event, the taxable base, the subjects covered by the tax, and the special rate at which they will be taxed. Tierra del Fuego, in its Tax Code, only available in Spanish here, establishes a special taxable base for transactions involving the disposal of cryptocurrencies. Buenos Aires province, which also in its Tax Code, only available in Spanish here, outlines the scope of the taxable event, the taxable base, and the subjects to be taxed.

Clearly, provinces rightly provide a much more detailed regulatory framework than the Nation, but unfortunately, only on those tax issues for which they are competent to rule according to the delegated faculties they have. So, while the provincial legislation is much more concrete, the Nation does not have a clear direction, even though it is nationally responsible for the thickest tax regulation and, however, gives us fragmented and scarce legislation.

Labor law implications

Argentina's labor law framework is broadly protective of the worker, as evidenced by the Labor Contract Law (LCT), only available in Spanish here. This is consistent with Article 14 bis of the National Constitution, which establishes a highly protective standard for the worker. However, the legislator has left much to be desired when it comes to regulating the role of cryptocurrencies in the employment relationship, more specifically their use as a currency for paying remuneration.

Under LCT, only 20% of a salary can be paid in species, which includes products, payment in US dollars or other currencies other than Argentina, and even cryptocurrencies. This is because cryptocurrencies are not considered currency, so they cannot be used to cover the remaining 80% of the remuneration, which must be paid in cash.

However, the fact that cryptocurrencies constitute a payment in species does not mean that they are not a salary. Consequently, the payment through them must be registered in the employee's salary receipts, in the employer's salary book, and in the affidavits submitted to the AFIP. Employers must also pay dues and contributions to the different social security subsystems, such as the integrated retirement and pension system.

Furthermore, it should be noted that the regularity of payment of wages in cryptocurrency could trigger the interpretation that the employee has acquired a right to receive the payment of his/her salaries in that kind; so, the employer will not be able, in the future, to change it without the employee's consent.

Moreover, the LCT establishes that salaries should be paid in a local bank account. Consequently, the labor authority could see the payment with cryptocurrencies as a breach of the rule regarding the payment of salaries. However, this situation may be very difficult to detect by the authorities, and we are not aware of precedents where fines have been applied due to payments with cryptocurrency.

Given the high volatility of the valuation of cryptocurrencies (excluding stable coins), it is advisable for the parties to agree on how their valuation will be calculated for the purposes of registration, the calculation of severance pay, vacations, licenses due to illness, bonuses, and other law institutes.

In the case of self-employed workers, the autonomy of will is the rule, as in any other contractual relationship. The parties can agree to collect and pay professional services entirely in cryptocurrencies. However, cryptocurrencies are still an unrecognized instrument for canceling obligations, so neither of the parties will be able to pay the professional services or demand its payment in crypto if it was not previously agreed upon. Additionally, it is not possible to convert the already agreed-upon payment method to crypto, as cryptocurrencies are not legal tender currency.

Finally, it is worth noting that a bill introduced to the National Congress in 2021 established a regime to allow workers and self-employed individuals who export minor services to receive their remuneration in cryptocurrency. Although the bill lost parliamentary status, it denotes interest in the matter and marks a milestone in what could become a future regulation.

Criminal law impact

In line with what has already been said, although there are regulations around cryptocurrencies and their use, the truth is that it is still insufficient and incomplete. Currently, there are no crimes or offenses that apply exclusively to the theft or loss of cryptocurrencies, but they are related to cybercrimes, which are expressly contemplated and have a more robust regulation.

Such assets are often the object of crimes because of the difficulty of tracing them and their easy movement from one country to another. Likewise, their removal requires some engineering which implies that it is not necessary to employ methods of violence.

These characteristics make cryptocurrencies very attractive assets for theft, so more and more cases in which they are the object of the crime. However, this situation does not mean that they are not protected by existing criminal offenses.

That is why Argentina has been working on creating robust legislation that is useful to prosecute and punish cybercrimes since 2008. The normative change in Argentina, as in so many other countries, was driven by the Budapest Convention. This convention was the first international treaty on cybercrime, the use of new information and communication technologies, and the collection of digital evidence. It covers criminal law, criminal procedure law, and international cooperation.

Accordingly, criminal offenses such as violation of electronic communication; access, seizure, suppression or diversion,^[7] publication of an electronic communication,^[8] computer fraud,^[9] computer damage or sabotage,^[10] interception or capture of electronic communications or telecommunications,^[11] among others.

Although the legislation has been adapted for some new threats some years ago, the reality is that security in the cyberenvironment requires constant adaptation that reaches such current and widely used issues as cryptocurrencies, a situation in which work is being done but much remains to be done.

Regarding its relationship with cybercrimes, it should be noted that there are specialized prosecutors' offices (both at the national and provincial levels) responsible for prosecuting such crimes. The main prosecution offices are as follows:

• Specialized Prosecutor's Office in Computer Crimes and Contraventions of the Public Prosecutor's Office of the Autonomous City of Buenos Aires (UFEDYCI). The unit is headed by Dr. Daniela Dupuy and has exclusive competence throughout the autonomous city of Buenos Aires (CABA). Its objective is to provide an immediate response to criminal cases that fall within the scope of the criminal justice system of CABA, through an efficient digital investigation, so that, in a short time, the oral and public trial can be reached.
• Specialized Prosecutor's Office in Cybercrime (UFECI). It was created to strengthen the agency's response capacity in the detection, prosecution, and repression of organized crime and crimes that most undermine citizen security. It is headed by Dr. Horacio Azzolin. The main task of UFECI is to conduct preliminary investigations and assist prosecutors in cases where the computer system has been the object of the crime or has been the principal or accessory means of committing it.
• Department of Cybercrime and Applied Technologies of the Prosecutor's Office of the Province of Buenos Aires. It is a specialized unit responsible for investigating crimes committed through electronic and technological means and providing technical support in criminal investigations related to technology. It is headed by Dra. Gisela Burcatt. In addition, within the province of Buenos Aires, units were created in the different judicial departments such as the Cybercrime Prosecutor Specialized Fiscal Unit by Dr. Alejandro Musso, the Prosecutor specialized in Cybercrime against Childhoods and Human Trafficking in the Judicial Department of Quilmes by Ernesto Daniel Ichazo, the Prosecutor Specialized in Crimes Related to Human Trafficking, Child Pornography and Grooming of the La Matanza Judicial Department, Office of the Special Prosecutor for Crimes related to the distribution of images containing child sexual abuse and Grooming of Trenque Lauquen, among many other prosecutor’s offices in the province of Buenos Aires.

Likewise, the provinces have created their own specialized fiscal units as in the case of Córdoba with the Cybercrime Office of the Public Prosecutor and the Cybercrime and Digital Investigation Assistance Unit in Rio Negro.

These prosecutors are responsible for carrying out investigations and the recovery of cryptocurrencies that are subject to crimes, but they are also those who made these assets subject to the protection of justice, as will be addressed in the next section.

It should also be mentioned that agencies have been created in different state orbits to assist these prosecution units in the prosecution of these crimes.

A glimpse of protection for cryptocurrencies: some light at the end of the tunnel

Despite the lack of regulation in Argentina, there is an incipient path toward the development of a more comprehensive regulation framework. The Markets in Crypto Assets bill, which is being jointly drafted between the CNV, the Central Bank, and the AFIP, is a significant step in this direction. The bill aims to regulate companies that provide cryptocurrency services (including Crypto Exchanges), to provide greater protection to users and generate a transparent market.

Among the main measures proposed to be implemented are the creation of a registry of digital assets service providers, the establishment of marketing breaches for market manipulation and insider trading, and equating Crypto Exchanges to banks. This will require the Crypto Exchange to comply with more rigorous requirements to protect consumers' assets and make them liable in case they lose them.

Although we can see a somewhat hopeful future in the distance, the bill does not provide enough security against the current reality of the flow of cryptocurrencies in Argentina, with all the risks that this implies. Their very characteristics - their anonymity, their global scope, their storage outside the banking system, their ease of transportation, their easy and cheap transfer to any place in the world, and the lack of coordinated regulation over them - make them a potential instrument for criminal activities.

Despite the lack of a regulatory framework, judges have already pronounced on the matter on several occasions, so there is already a certain established standard that supports the idea that it is no longer possible to look the other way. Among the precedents, we can find sentences with pro-consumer tendencies, involving prison sentences for frauds in which a fictitious cryptocurrency was used as a front, or in which the cryptocurrencies of other people's accounts were electronically drained.^[12] In addition to sentences, the judiciary has also imposed precautionary measures, such as a crypto-seizure of accounts that belonged to two defendants for attempted money laundering, or a crypto-kidnapping from the account of a criminal who swindled an enterprise and emptied all the funds in its accounts (the latter was carried out by a specialized prosecutor's office with knowledge in the field).^[13] To a lesser extent, we can also find some judges who tend to be more flexible in their judgments, basing their decisions on the risk associated with cryptocurrency operations.

Conclusion

A significant turning point occurred on December 10 with the inauguration of a new president from a political party divergent from the previous leadership. This change suggests a potential shift in cryptocurrency regulation and limitations.

Argentina's cryptocurrency activity has been thriving, driven by economic challenges such as inflation and currency devaluation. Despite its growing popularity, the regulatory landscape has been marked by ambiguity and discouragement.

The lack of a unified national stance has resulted in scattered regulations at both national and provincial levels, contributing to uncertainty in the market. However, recent political changes, with the current president leaning towards a more liberal ideology, suggest an imminent shift in regulation.

In conclusion, while Argentina finds itself in a regulatory middle ground, recent political changes and ongoing legislative efforts suggest a potential shift towards clearer and more unified regulations for cryptocurrencies. This could not only bring transparency but also facilitate better control and utilization of cryptocurrencies in the country.

Gustavo Bethular Partner
[email protected]
Sofia Grassi Senior Associate
[email protected]
RCTZZ, Buenos Aires