Argentina’s Dreams of Greater Crypto Adoption Threatened by New Regulations and Milei’s Shifting Rhetoric

When libertarian politician Javier Milei was elected president of Argentina late last year, many in the world of traditional finance and digital assets speculated that the seemingly pro-Bitcoin leader could help boost the he increased use of cryptocurrencies in South America’s second-largest economy.

But after the adoption of new regulations recently revealed – which requires both companies and individuals working with or trading digital assets to register with the government – ​​many wonder if Argentina is now moving away from a new era defined by less regulation and greater use of cryptocurrencies.

Critics of the new regulations see it as adding an unnecessary layer of compliance that will complicate crypto adoption rather than encourage it.

“This seems to go in the opposite direction compared to Milei’s rhetoric,” said Hernan Yellati, both Argentine and partner at Borderless Capital. The company recently announced plans to open a Latin American headquarters in Argentina, a country it believes is leading the way in digital asset innovation.

I hope Milei will lead the way to a new era

Milei’s ascendancy and Argentina’s currency woes appear to pave the way for reforms and increased use of cryptocurrencies, particularly Bitcoin. “His presidency could pave the way for greater acceptance and the integration of cryptocurrencies into the Argentine economy, offering a potential solution to long-standing problems of inflation and financial instability,” Grayscale Research said the day after Milei’s election victory.

In December, two weeks after Milei took office, in what appeared to be a sign that his government was committed to embracing digital assets, Argentina announced that bitcoin could be used as currency in official contracts. Many Argentines have turned to crypto as an alternative as the value of their local peso has eroded.

Although Yellati said it appears the registration rule is a carryover from the previous administration, it could take time to undo it. “Even if the government continues its rhetoric of less regulation and free markets, we could see significant delays and sand in the wheels in rolling back this specific regulation,” he told The Block. “I would expect more clarity from the government in the coming days, given the negative repercussions.”

Julián Colombo, country manager of Bitso Argentina, downplayed the potential impact of the new regulations and the idea that Milei is a true advocate for digital assets. “I don’t see any political involvement at the level that some media give to [the new regulation]“, Colombo told The Block. “President Milei is not personally involved in this process and, contrary to what was said during the campaign, he is not a president for whom cryptocurrencies are currently a priority.”

Bitso is one of the leading crypto companies in Latin America. Founded in Mexico in 2014, the company said it had 8 million users at the end of last year.

Change in “rhetoric”

When Milei was elected last November, Ruslan Lienkha, head of markets at YouHodler, said he expected crypto use could eventually be “much broader” in Argentina under the new president. Now, Lienkha said it appears Milei may be having a change of heart.

“There is nothing wrong with the registration rule itself. However, it would be a possible step toward an “older policy,” he told The Block. “We can also notice the change in Melei’s rhetoric, after he decided to postpone the abolition of the central bank and dollarization. »

While many hoped Milei would pave the way for increased crypto use, the new president was also expected to deliver on his promises to reform the central bank and dollarize the economy, a move that could ease massive hyperinflation problems and monetary depreciation of Argentina. But last week, Milei told Bloomberg his reform plans will take longer than expected.

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