A Lapsus hack will likely point Argentina's central bank chief toward a pathway of caution on crypto
Crypto innovation is not Miguel Angel Pesce's priority, but neither is outlawing it completely.
When Argentina’s Mercado Pago was hacked earlier this month, it put the Latin American merchant and e-commerce giant in a league of victims shared by Samsung and NVIDIA. They, too, suffered attacks by the Lapsus cyber crime group.
But the hack also signaled where Argentina’s central bank chief Miguel Pesce is focusing his attention on matters of crypto wallets and assets. Pesce warns that crypto wallets could be subjected to cyber attacks as well. He’s growing suspicious of any money transfers happening outside the banking system, including those flowing through bitcoin and lightning wallets.
In a climate of high levels of inflation and low levels of economic stability, Pesce is probably going to prioritize measures that protect consumers - whether from cyber attacks or frauds - before setting up policies that foment faster innovation of crypto banking in Argentina.
That means two things for crypto firms operating there. On one hand, firms should expect to see increased pressure to comply with government watchdog units. In fact, crypto firms will now need to report their transactions with the country’s Anti-Money Laundering unit (Unidad de Información Financiera, UIF).
On the other, adoption of crypto exchanges like Ripio, and digital wallets like Strike and Muun, will probably accelerate. The issue is that Argentines want to dodge inflation and capital controls, which effectively limit the amount one can exchange from pesos to US dollars or Euros. Crypto exchanges and wallets solve that problem.
To avoid the controls, workers in Argentina are increasingly getting paid in crypto. Workers who get paid in crypto and exchange on the parallel, non-official blue market receive a value of 83% more than if they had gone through the banking system.
Crypto wallets undermine the capital controls that the government sees as quintessential for financial stability. That said, the central bank head believes in digital money. It appears that he wants the Argentine financial system to move toward a point where QR codes on traditional banking platforms mesh with digital wallets. That means Pesce will eventually warm up to crypto accommodation.
The central banker - like many in Buenos Aires - is old enough to remember the 2001 bank run and the controversial Corralito measure that was needed to rescue Argentine banks. The risk for firms is that digital innovation goes ahead in slow motion. It’s important to remember that innovation isn’t being prohibited in Argentina, though. It’s just that Pesce doesn’t want to let crypto proliferate so fast that it breaks the financial system he’s charged with keeping intact.