Sep 11, 2020 14:42 UTC
Sep 11, 2020 at 14:42 UTC
Summary to the Legal & Regulatory Context:
Argentina, the state which acted as the regional leader in the acceptation procedure of the cryptocurrencies, yet it still lingers, making the pathways for the same. Consequently, of the glitches of the economic instability as well as the foreign exchange restrictions, Argentina became one of the initial or the primary acceptors of the cryptocurrency. In the whole Latin America, in addition to the whole world, this also happened as a consequence of the energies applied to safeguard its savings against inflation & to stun the prohibition on purchasing & transporting the foreign currency out of the country.
Cryptocurrencies are not prohibited in the state of Argentina, thus, legal. But there are some stringent regulations relating to the cryptocurrencies issued by the government in the arena of taxation & the prevention of the money laundering & financing of terrorism.
There is no enactment of precise regulations on the issuance, exchange, or, in general, the use of cryptocurrencies in its place choosing to observe ongoing developments regarding the impact of cryptocurrencies in the Argentine market.
Laws Concerning To Investment & Security:
The is no specific regulation concerning the sale of the cryptocurrencies or other sorts of the tokens underneath the securities laws or investment laws in Argentina.
But the system of no regulatory authority issuing the crypto-currency, there is an issue that is that under the Argentine Law, Bitcoins can’t be regarded as securities & under the Argentine Law, the securities are negotiable instruments onto which their issuers incorporate credit rights. Nevertheless, the scenario can’t be stretched to the other cryptocurrencies or the tokens issued by any central authority.
Rendering the securities & exchange commissions in other parts of the world, the National Securities Commission (CNV) issued a communique on initial coin offerings (ICOs) to warn investors of their potential risks.
The CNV cleared that the ICOs would not, in principle, be subject to regulations regarding the capital markets, Although, it has also mentioned that, depending on their structure as well as particular features, certain ICOs may be subject to the control of the CNV.
Succeeding the example of securities & exchange commissions in other parts of the world, the National Securities Commission (CNV) issued a communiqué on initial coin offerings (ICOs) to warn investors of their probable risks.
The CNV has elucidated that ICOs would not, in principle, be subject to regulations regarding the capital markets. However, it has likewise stated that, depending on their structure & particular characteristics, few ICOs may be subject to the control of the CNV.
The communiqué further warns investors about the following potential risks associated with ICOs:
- a lack of specific regulations;
- price volatility & liquidity risks;
- the probability of fraud;
- inadequate access to relevant information;
- the early stage of projects;
- the probability of technological & infrastructure failures; &
- the transnational nature of transactions connecting ICOs.
Even though the CNV states that ICOs are not, in principle, subject to specific CNV control, the communiqué elucidates that claims may be filed with the CNV in cases where there is a suspicion that an ICO could be fraudulent.
Even if there are no specific prohibitions, given the current lack of certainty in connection with the possibility of considering specific cryptocurrencies as securities under the Capital Markets Law (CML),2 regulated entities subject to the CNV’s control, such as investment managers, investment advisers & fund managers, tend not to function with such assets.
Furthermore, the formal necessities for the operational activities of such players have not been designed to address cryptocurrencies. Thus, more than a few regulations may act as practical restrictions that hinder the possibility of operating with such digital assets.
Banking & Money Transmission:
In Argentina, cryptocurrencies like Bitcoin are demarcated by the Financial Information Unit (UIF) as a ‘digital representation of worth that can be digitally traded & functions as a medium of exchange; and a unit of account; and a store of worth, but does not have legal tender standing in any jurisdiction & is neither issued nor guaranteed by any government or jurisdiction.’
The Argentine Civil & Commercial Code (the Civil Code) determines that individuals & legal entities are entitled to all the corresponding rights over the assets that are part of their property. In this respect, the Civil Code classifies assets into two categories: tangible & intangible.
As divergent to those that have a physical entity, intangible assets like intellectual property &, in general, rights do not happen in the physical sphere. Therefore, as a digital representation of value, cryptocurrencies are intangible assets that can form part of individuals’ & legal entities’ property.
Section 765 of the Civil Code regulates that only the Argentine fiat currency can be considered as money, thus not including any possibility of involving cryptocurrencies in such a category.
In connection to the prospect of considering cryptocurrencies as currency under Argentine law, Section-30 of the Argentine Central Bank’s Charter3 provides a definition that dismisses any instrument that has no legal tender directly or indirectly imposed by its issuer, or that is not issued with a nominal value lower than 10 times the amount of the maximum national money bill in circulation. As such, to date, this provision eliminates the possibility of considering several cryptocurrencies as currency under Argentine law. Besides, extensive interpretations of Section-30 of the Charter are prohibited.
In this respect, in May 2014, the Central Bank issued a non-binding press release stating that virtual currencies are not issued by itself, or any other international monetary authority, & thus are not legal tender & are not guaranteed by any government. However, there have not yet been any local precedents or governmental decisions or communications in connection with any cryptocurrency issued by foreign authorities.
The UIF differentiates between virtual currency & electronic currency, stating that the latter involves the electronic transfer of legal tender, while virtual currency transactions do not involve legal tender.
For instance, the only specific regulations associated to cryptocurrencies in Argentina are UIF Resolution 300/2014 (the UIF Resolution), which implements supplementary reporting compulsions for few obliged subjects (see below) under the Anti-Money Laundering Law (the AML Law)4 (see Section V) & the Tax Reform Law5 (see Section IV).
The AML Law lists a numeral of persons, together with financial entities, broker-dealers, credit card companies, insurance companies, public notaries, & certain government registries & agencies, that have, among other things, specific reporting obligations under the AML Law (obliged subjects), & provides for certain general obligations together with knowing your customer (KYC) procedures; reporting to the UIF any transaction distrusted of money laundering or terrorism financing; & abstaining from unveiling to their clients or third parties activities performed in compliance with that statute.
As elucidated previously, one of the few regulations on cryptocurrencies in Argentina is the UIF Resolution, which involves most obliged subjects under the AML Law to report all the transactions done with cryptocurrencies, regardless of their amount.
Following the Financial Action Task Force’s guiding principles, the UIF also warns gratified subjects about the risks involved in transactions using cryptocurrencies. In so doing, the UIF also needs obliged subjects listed in the UIF Resolution to monitor severely any transactions performed with cryptocurrencies by their clients.
There are presently no specific regulations on exchange activities. Nevertheless, anyone wanting to offer securities within the Argentine territory openly needs to request a public offering authorization from the CNV.
The trading of securities needs a license from the CNV. Therefore, the exchange of cryptocurrencies as a permanent activity will necessitate a license if the cryptocurrency being exchanged is security.
As formerly stated, considering the lack of a central issuing authority, cryptocurrencies like Bitcoin can’t be classified as securities. Nevertheless, this conclusion may not be extended to other cryptocurrencies (tokens) issued by a centralized entity.
The mining of Bitcoin & other cryptocurrencies is permitted. There are currently no specific regulations regarding such activity.
Regulation of Issuers & Sponsors:
There are at present no precise guidelines on issuers & sponsors. See Section III.
Criminal & Civil Fraud & Enforcement:
There are presently no precise criminal or civil fraud regulations concerning the exchange or issuance of cryptocurrencies; consequently, either the general criminal & civil law should apply, depending on the specific case at stake.
Among the amendments announced by the Tax Reform Law, the taxable income derived from the commercialization of digital currencies was merged into the Income Tax Law (ITL). One of the chief purposes of the tax reform was to tax financial income.
Both the Tax Reform Law & the ITL describe digital currencies or the scope that this notion encompasses. The conforming regulations of the Tax Reform Law have not been issued yet. We recognize that the meaning of this concept should be similar to that function to virtual currencies as well-defined by the UIF Resolution, & therefore this Resolution should apply to cryptocurrencies.
The ITL also determines that if an issuer of cryptocurrencies is domiciled in Argentina, then Argentine-sourced income would be generated as a consequence of the exchange thereof. As such, the profit derived from the sale of cryptocurrencies will be considered income & taxed as such at 15% when derived from either Argentine or foreign sources.
Providing that cryptocurrencies fall within the description of intangible assets; the value-added tax should not impact the exchange of cryptocurrencies.
In general, & in addition to the instances as mentioned above, cryptocurrencies will be taxed like any other intangible asset.
There are no boundary limitations or obligations to announce cryptocurrency holdings in Argentina.
There are no reporting necessities for cryptocurrency payments made besides of an absolute value. At present, the only specific reporting necessities in connection with cryptocurrencies are regulated by the UIF Resolution (see Section V) & the Tax Reform Law (see Section IV).
Cryptocurrencies should be treated as intangible assets for the tenacities of estate planning & testamentary succession. This may theoretically change in the future in connection with tokens dispensed through ICOs, subject to the CNV’s opinion on their legal nature under the CML.
Intended for corporate determinations, cryptocurrencies may be contributed as the capital of an Argentine entity. Nevertheless, as a contribution in kind, these cryptocurrencies must be appraised in advance. The type & requirements of the assessment will depend on the sort of entity getting capital involvement.
On 11 March 2019, the Argentine Executive Branch issued Decree No. 182/2019 (the Decree) amendable the Digital Signature Law No. 25,506 (DSL). The Decree formed the figure of the ‘trusted third-party service provider.’ This figure comprises the operation of dispersed ledger technologies for the preservation of electronic documents, management of smart contracts & other digital services.
Moreover, these services also consist of the electronic certification, digital identification & other services detailed by the licensing entity established by the DSL. Individuals, legal entities, consortiums, public entities & non-state public entities may be trusted third-party service providers under the Decree.
The Decree has not been additional regulated yet. Henceforth, specific guidelines concerning the use of disseminated ledger technology by trusted third-party service providers are still pending.
The unceasing development of new technologies gives rise to several economic, legal & financial problems. In this sagacity, the international community’s receptiveness to cryptocurrencies has elevated significant concerns, & has therefore required different legislation to analyze & study the issue.
In Argentina, the matter is not yet entirely developed, & only the Argentine Central Bank & the UIF have dispensed opinions on the matter. The regulatory authorities have implemented a wait-and-see strategy in connection with cryptocurrencies.
The description of cryptocurrencies will, without doubt, influence the decision as to whether or not the current legislation in Argentina smears to transactions in which cryptocurrencies are used.
There are presently no sandbox or other programs intended to endorse research & investment in cryptocurrencies. However, the Argentine Central Bank has created several research groups, among which there is a group precisely dedicated to cryptocurrencies & blockchain technologies composed of members of both public & private entities to analyze potential regulatory alterations to enable the use of new technologies in the financial services industry.
Despite the prospects concerning the meeting of finance ministers & central bank governors of the G20 countries in Buenos Aires in March 2018, no regulatory framework or precise strategies on cryptocurrencies were dispensed. Discussions stated them, providing alerts as to their dangers for consumers & investors. However, nothing was discussed as to the way cryptocurrencies should be advanced by the authorities, except for a call upon international standard-setting bodies to monitor cryptocurrencies & their risks while evaluating a multilateral response, if appropriate.
The government plans to control transactions with Bitcoins by amending the AML Law to include stock markets, wallets & brokers as entities required to report certain transactions with cryptocurrencies to official objects. Compulsions to be complied with would include KYC procedures, the monitoring & reporting of suspicious transactions & the employment of a compliance officer in charge of realizing due diligence.