Buenos Aires has allowed certain local taxes, vehicle registrations, driver’s licenses and fines to be paid with cryptocurrency for the first time. File Photo by Leo La Valle/EPA
Aug. 28 (UPI) -- Buenos Aires has allowed certain local taxes, vehicle registrations, driver's licenses and fines to be paid with cryptocurrency for the first time as part of an effort to position the Argentine capital as a leader in using digital currency.
"The goal is for the city to be a global leader in crypto. We already have the human capital, and now we are creating the tools by reducing bureaucracy to make compliance easier for taxpayers and to support the arrival of new companies setting up here," said Jorge Macri, chief of government of Buenos Aires, at the launch of the project.
The initiative, called Buenos Aires Cripto, includes measures to modernize the tax system, promote foreign investment and position the capital as a regional benchmark in the field.
"The digital economy requires us to update and adapt with a government that is modern, agile, efficient and smart," Macri said. He added that new tax measures are being introduced to give businesses a friendlier regulatory framework, including simpler tax filings and changes in how some taxes are calculated.
The shift reflects the fact that both companies and individuals use cryptocurrencies in daily life, including to receive payments from abroad.
As of 2024, about 10,000 Argentines were receiving salaries from abroad through crypto, PayPal or Brazil's central bank payment system, PIX. Buenos Aires also has more than 10 million crypto accounts, representing 22% of those opened in Latin America.
"The adoption of cryptocurrencies in Argentina is not new," said Carlos Torres, lead partner of the Payments Practice at consulting firm EY. He explained that the trend has been growing for several years as a result of Argentina's economic troubles.
"It has been driven mainly by inflation, economic instability and currency volatility, where cryptocurrency was seen as a refuge in the national context," he said.
Exchange platforms such as Binance and Lemon are widely used in Argentina, with Bitcoin leading as the main investment alternative.
Francisco Diaz, director of the business school at Universidad Mayor in Chile, said restrictions on the foreign exchange and international capital markets pushed Argentines to seek creative solutions for using foreign currency.
"Cryptocurrencies, particularly the more stable ones -- stablecoins -- have been widely adopted in recent years as a means of payment, a tool for receiving funds from abroad, for transactions and as a way to save in assets less exposed to inflation. That has expanded awareness and acceptance and fueled the growth of an ecosystem of entrepreneurs and companies tied to the crypto world," he said.
Analysts say the outlook is favorable for Buenos Aires to become a leading city in crypto.
"Given this context, I believe Argentina has all the conditions to expand the use of crypto, especially now that it has the regulatory framework launched in 2024," Torres said.
Argentina recorded the highest number of cryptocurrency users in Latin America in 2024, receiving $91.1 billion in assets, a 6.7% increase from 2023, according to the State of the Crypto Industry 2024 report by Lemon.
Globally, India ranked first, followed by Vietnam and the Philippines, according to the 2024 Global Crypto Adoption Index by Chainalysis.
"India stands out because of the size of its population, its widespread knowledge of technology and the broad use of the Internet and mobile devices, which create favorable conditions for developing this ecosystem," Torres said.
The use of virtual currencies brings benefits but also opens the door to crimes such as money laundering.
"The use of cryptocurrencies reduces transaction costs and makes it easier to create new financial instruments, but it also increases the risks of fraud, tax evasion and money laundering," Diaz said.
Recently, Argentina's Office of Economic Crime and Money Laundering reported a rise in the use of digital assets and virtual platforms to launder illicit funds or justify profits, mainly from drug trafficking.
The problem, Diaz warned, is that innovation is moving faster than regulation.
"It is the responsibility of governments and regulatory institutions, such as central banks, to create a framework that ensures transparency, traceability and cybersecurity. Digital technologies such as blockchain can facilitate traceability," he said.
