“This Technology Can’t Be Stopped,” Says Top Argentina Regulator About Crypto

Argentina’s top regulators are backing crypto in a big way, with a top official from Javier Milei’s government claiming the technology is unstoppable.

“The reality is that this technology is unstoppable–growing at an unprecedented rate–and as regulators we have to take our role seriously so we aren’t left behind,” said Daniel Vitolo, Argentina’s General Inspector of Justice, a top position in libertarian president Javier Milei’s central government. He reckoned that the “entire country will benefit” from having authorities come on board and build out the pro-crypto framework that the nation’s Crecimiento community is experimenting with.

Crecimiento is a grassroots crypto-native movement that wants to establish a haven for crypto and tech founders in Argentina’s capital of Buenos Aires. The goal is to work together with Argentina’s new government to provide incentives for the crypto industry, including a favorable tax structure, funding, a less cumbersome business process, and attract more foreign investment.

During the month of August, Crecimiento has held a month-long pop-up city in Buenos Aires dubbed Aleph. Its near-term goal is to create a sandbox, or a safe space created by regulators to test out different processes, frameworks, and elements of what could be a broader legislative piece later on–if successful. These types of temporal digital cities have been widely tested across the globe, from Prospera in Honduras, to La Union in El Salvador.

Longer-term, some of its organizers are advocating for a special economic zone to develop in Buenos Aires, meant to foster the tech industry, as well as a nation-wide framework for crypto in the country.

Global Potential

The mission makes sense for Argentina. For decades the country has suffered double and even triple-digit inflation rates, capital controls, a convoluted business process, and a massive brain drain of talent. That reality spurred one of the largest cryptocurrency communities in the world, with Argentina becoming home to some of the largest companies in the region, and a huge developer and crypto enthusiast community.

But what’s happening with Aleph and Crecimiento has the potential to be broader than the country’s borders.

If successful, Argentina could become a haven for crypto and broader tech founders, developers, artists, and investors. With regulators like Vitolo and others touting the benefits of the technology, it might be a matter of time only before capital, and builders start flocking to South America in search of a friendly regulatory environment to continue building out the ecosystem.

Special Economic Zone

Aleph has been touted as a pop-up city, which is a temporal digital city that aims to experiment with a legal framework and work with local businesses to figure out what needs to happen for a broader tech-friendly environment to appear.

“These [pop-up cities] are creating the environment for idea diffusion and project development,” said Juan Benet, founder of Protocol Labs, one of the main firms backing the Crecimiento movement during an interview prior to the kick off of Aleph. The idea is for a physical place where people–founders, developers, and enthusiasts–can come together “in close proximity” and discuss the problems and potential solutions to many of the problems that affect a specific region or country.

Benet is not just bullish on pop-up cities, but the concept of special economic zones (SEZ)–something that Aleph might spin off into.

SEZs are specific areas where business, and trade laws differ from the broader country’s framework. They are aimed at increasing employment, attracting outside capital, job creation, and experimenting with different administrative structures. To incentivize companies and investors, they offer lower tax frameworks, less burdensome business processes, labor regulations, import and export specific laws, and others.

Hundreds of special economic zones exist around the world, spanning from Chile to Dubai, and Montenegro. Benet added that he hopes to see Aleph turn into a special economic zone.

“Some of this might be building new startups, new products, new social structures, or it might be about bringing back a lot of the amazing technology that Argentineans have created over the years,” he said.

Local Sandbox

Under the framework of Aleph, there is a local sandbox currently underway to test out a lot of what Benet and the team of local Argentineans in charge of the city have been testing.

Milagros Santamaría, head of the legal team for Crecimiento, told The Defiant that there are already hundreds of local businesses that have signed up to the sandbox. They have been experimenting with accepting different tokens as payment, along with using QuarkID, a self-sovereign ID app that allows for consumers and merchants to remain in control of their data when transacting.

QuarkID is the digital trust framework developed by the Government of the City of Buenos Aires that creates a new digital identity system and gives people control over their information, with a security anchor through blockchain.

Morfi, the most widely used token operating in the Aleph ecosystem, has been used in more than 2,100 transactions, and has processed hundreds of millions of Argentine pesos, with a clear uptrend.

According to Santamaría, once the month is over, her team will draft a report for the Argentine Chamber of Financial Technology. It’s meant to add on to a document that will end up in Congress to elaborate on legislation for the federal level.

The sandbox will help “tell us what documents businesses will ultimately need, which aren’t needed, along with helping authorities figure out what should or shouldn’t be included in a broader legal framework,” she said.

Santamaría said her team has already received feedback from the country’s SEC, the CNV, including on what might constitute a token offering.

Crecimiento’s focus has been to bring in a diverse set of actors in the Argentine regulatory environment to help approach every aspect of the business process; from paperwork to tax implications.

“This isn’t a short-term effort, or something solely for Aleph, but really we are building with 30-40 years in mind,” Santamaría said.

That’s why they’re inviting the entire spectrum of regulators, from the country’s Central Bank, the CNV, Unit of Financial Information (UIF in spanish), and members of Milei’s central government to build.

Current Regulatory Framework

The movement is banking on Milei’s pro-business stance, although he has yet to make any explicitly pro-crypto remarks.

That said, the country has made regulations that favor the digital asset industry. In late December, authorities in Argentina authorized the use of Bitcoin or other cryptocurrencies to settle contractual agreements.

And in March this year, authorities created the Registry of Virtual Asset Service Providers, requiring firms that process more than $27 million ARS or $30,000 a month to register. The aim is to fight against money laundering in the country.

However, the Central Bank last year banned banks from offering their clients exposure to cryptocurrencies, a mandate that has not changed.

Regulation Day

Last week, regulators and key figures present at Aleph’s Regulation Day said they are favorable to the digital asset space, strengthening the case that authorities are on board with building out the ecosystem.

These included the president of the country’s SEC, Roberto Silva, Vitolo of the General Inspectorate of Justice, Mario Adaro of Mendoza’s Supreme Court, Diego Fernández of the local city of Buenos Aires government, and others.

Vitolo said that there’s a need for an update on the current regulatory regime for the technology, which has already seen some recent changes. Three weeks ago, authorities approved users to tokenize warrants and certificates of deposits.

Alongside Vitolo, the President of Argentina’s SEC (the CNV), Silva, agreed, and pointed out that the CNV sees the need to update the regime surrounding tokenization, in a bid to bring a variety of Real World Assets (RWAs) on chain.

Silva, the equivalent of Gary Gensler in the U.S., had words of calm to listeners who might be worried about the potential for excessive overreach from authorities.

“We will follow the law but we are also not going to overregulate the industry,” he said.

A Blueprint For The Country

What’s happening in Aleph, organizers hope, will offer a clear outline for the rest of Argentina.

Buenos Aires is a very innovation-friendly city, said Santamaría, but there are many others looking to Aleph for what might come out of the special economic zone underway. “Córdoba, known as the rebel city thanks to its forward thinking, is very technologically advanced and is probably closely following what’s happening here,” she said.

Mendoza as well. Not only is Santamaría and three others of Crecimiento core team from the small western city just off the Andes, but a member of the Supreme Court of Mendoza, Mario Adaro who was also present last week at Regulation Day.

Argentina is shaping up to become a beacon of crypto-friendly innovation, with local authorities agreeing on two key points: they want the industry to grow, but they don’t want it to get out of hand.

For Santamaría, there’s a clear aim in sight: “offer predictability for companies to come and stay.”