Argentina on the Edge: Central Bank Cracks Down on Bitcoin and US Dollar As US Expects $57 Billion IMF Agreement to Be Upheld
Argentina is in a tight squeeze. The Central Bank of the Argentine Republic is reportedly restricting individual purchases of Bitcoin following the recent limits imposed on the amount of US dollars people can purchase. The move is designed to stop excessive outflows of the nation’s declining foreign exchange reserves.
According to Reuters, the outflow of foreign currency increased significantly after Argentine president Mauricio Macri was removed from office on October 30.
US dollar purchases are limited to $200 per month through local bank accounts and only $100 a month in cash until the end of this year. The new limit is considerably less than the previous $10,000-per-month cap that was set in early September of 2019.
Restrictions on the movement of money have been ramping up since Argentina elected a new government on Sunday, igniting a sell-off of the Argentine peso, bonds and equities, and putting pressure on the value of the country’s national currency.
While incumbent Mauricio Macri’s government introduced capital controls in order to stabilize the country’s markets, including restrictions on US dollar purchases, Argentina’s foreign reserves have dropped by more than $20 billion.
New York-based anti-money laundering specialist and advisor to Metal Pay and Bitwage, Juan Llanos, notes via Twitter that Argentina’s Bitcoin exchanges are not advertising their services due to fears that the nation’s government might also introduce stricter regulations on their operations.
“Oh, oh. It’s moving faster than I expected: Argentina’s Central Bank just restricted payments with locally issued credit, debit and prepaid cards for all transactions involving, among others, the purchase of [Bitcoin and other] crypto assets. What’s next?”
As reported by Cointelegraph Brazil, the Argentine central bank states that,
“Acquisition of Bitcoin and cryptocurrencies: It is prohibited to purchase BTC with this payment method [credit cards]. The only remaining alternative for this investment is to do so with funds transferred from a bank account.”
“Given the current degree of uncertainty, the board of the BCRA (central bank) has decided to take a series of measures [on October 30] that seek to preserve the reserves of the Central Bank.”
To prop up the economy, newly-elected president Alberto Fernandez is dependent on the International Monetary Fund which approved a financing agreement of $57 billion last year. Fernandez has to balance the loan while facing rising poverty, inflation and dwindling reserves.
The United States, which controls 16.5% of the IMF’s voting power, expects Argentina to uphold its commitment.
Speaking on the sidelines of the Future Investment Initiative conference in Riyadh on Wednesday, US Treasury Secretary Steven Mnuchin says he wants “to see the people of Argentina, and the economy, succeed,” reports Reuters.
“They have a commitment to the IMF. Our expectation is that this government upholds that commitment and if they ask for changes, like any other country, the IMF will look at their request as part of what their economic plan is.”