Mandatory Bitcoin Reporting Ordered in Argentina

The July 4th announcement by Argentina’s Unidad de Información Financiera (UIF) that all financial service companies in the country would need to report all transactions involving virtual currencies.

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Mandatory Bitcoin Reporting Ordered in Argentina

The July 4th, 2014 announcement by Argentina’s Unidad de Información Financiera (UIF) that all financial service companies in the country would need to begin reporting all transactions involving virtual currencies. The primary concern, according to the UIF was the threat of both money laundering and the ability to use cryptocurrencies to finance criminal activities or terrorism. Unfortunately, like most such official concerns, the politics of the situation never allows that fiat currencies are used in the exact same manner as virtual currencies and that such onerous regulations will not stop its use by them any more than it does with dollars.

The UIF happens to be Argentina’s main money laundering police effort. The new regulations are basically a statement that this agency would not be helping Bitcoin with either acceptance or effective regulation in the near future. It has only been six weeks since Argentina’s central bank sent out warnings similar to those of other Latin America that the nature of Bitcoin was yet to be determined. This means that until the BCRA deems that Bitcoin is either a currency, a commodity or both, it has no financial nature.

It appears however that either the UIF disagrees with the BCRA and considers Bitcoin a currency or the BCRA may be planning on changing its stance. The following statement by the UIF was translated as follows:

 “Virtual currencies are often traded remotely online. The movement of assets and those entities from different countries can participate in the same jurisdictions that do not have controls to prevent money laundering and financing of terrorism, make it difficult for regulated entities to detect suspicious transactions.”

If both Bitcoin and dollars are used for these activities, for the same reason: anonymity, then both must be considered “currency”.  The agency opening said that the purpose of the law was to “prevent criminal funds from moving outside the country’s regulatory framework.

The UIF was very careful in its statement to draw a clear distinction between “virtual” currency and electronic money. Argentina defines electronic money as a simply an online form of fiat currency. Digital currencies fall outside those boundaries however because of their portability and so cannot be defined similarly.

The Argentinian decision basically puts Latin America in two evenly split camps with respect to virtual currencies. The public seems to be solidly behind the idea of a decentralized currency while both politicians and central banks are developing a myriad of excuses and “dangers”. The complaints are that virtual currencies are unregulated and hence allow unrestricted criminal activity and pose a huge risk to investors. In June Bolivia’s , El Banco Central de Bolivia outright banned virtual currencies and Columbia was extremely close to banning virtual currencies all together recently as well. But at the same time Bitcoin ATMs have been showing up  in Mexico. AstroPay has even launched Ripple in seven different Latin American countries, one of which is Argentina.

On the surface these regulations seem to be geared toward the regulations needed to get Bitcoin accepted. The fact is that it will never be accept until at least some level of transparency is available to both police and tax agencies of governments. The UIF statement also about the regulations, which is to be in effect beginning in August:

 “The regulated entities…must pay particular attention to the risk involving transactions with virtual currencies and establish enhanced monitoring on these operations.”

Not everyone in Argentina sees a positive spin on the UIS’s action however. Carlos Guberman a virtual currency researcher at the Universidad Argentina de la Empresa feels the tightening of the government noose:

“I think the decision of Argentinean authorities regarding virtual currency reports as suspicious of money laundering are a bad thing. It is somehow weird that at the very same time that there is in place a law for exteriorizing dollar holding of Argentinians, the UIF comes out with a measure like this that is clearly penalizing virtual currencies.”

 He believes that like fiat currencies, criminal Bitcoin transactions are conducted off the radar, not through businesses or exchanges, simply because it is easy to do. These off the grid markets will not be affected by the regulations.

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