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Central Bank of Argentina moves anti-crypto – Industry roundup: 9 May

Central Bank of Argentina intervenes to deter banks offering new cryptocurrencies

According to recent reports by Cointelegraph, the Central Bank of Argentina (BCRA) is intervening to block financial institutions from offering digital assets. This comes just days after the two largest banks in Argentina, Banco Galicia and Brubank, launched crypto trading, allowing their customers to purchase Bitcoin (BTC), Ethereum (ETH), USD Coin (USDC) and Ripple (XRP).

The BCRA said last Thursday that the move was to mitigate the risks that crypto poses to users and the entire financial system. Some of the risks include the high volatility of cryptos, their use for money laundering and their lack of regulatory protection. The decision to start crypto trading was initiated by a survey conducted by Banco Galicia, with 60% of respondents desiring access to digital currencies.

Reports indicated that BCRA has been critical of cryptocurrencies for quite some time, warning the public about risks, such as volatility and money laundering, since May 2021, despite low levels of significant acceptance. According to Statista data analysis figures, 21% of respondents in Argentina had owned or used cryptocurrency in 2021, the sixth highest adoption rate in the world and the highest rate in the Americas.

According to Argentina’s statistics agency, INDEC, Argentina's inflation rate rose another 6.7% in March 2022, the highest rate in 20 years, reaching 55.1% year-over-year growth. Some Argentinians looked to cryptocurrencies to hedge the rise in inflation. In April, rural towns began mining cryptocurrencies to combat inflation.

The shift in focus from last May 2021 is reportedly related to the International Monetary Fund’s (IMF) extended debt plan of US $44 billion, in efforts to deter Argentina from offering the use of cryptocurrencies. The BCRA's announcement is also inconsistent with the plans of the Mayor of Buenos Aires, the capital of Argentina. Mayor Horacio Rodríguez Larreta announced plans to digitize the city so that citizens could pay taxes in cryptocurrencies along with other blockchain plans in late April 2022.

Japan-based SBI Group’s cross-border platform to mainstream Ripple XRP payments despite the SEC v. Ripple lawsuit

SBI Group, a financial services company based in Toyko, Japan, a key partner to global payments company, Ripple, has taken a new step towards mainstreaming XRP as SBI Motor Japan, a cross-border e-commerce platform subsidiary of SBI Africa, has begun accepting cryptocurrency payments. According to reports, Japan's e-commerce platform will accept payments in two crypto assets, Bitcoin and XRP. It is the first such platform in the country to accept XRP as a payment method.

Blockchain is used for crypto asset remittances, securing that those remittances will continue to be used during the exchange despite any potential banking system malfunction or breakdown, while the internet is operational. The SBI Group commented that this type of remittance payment is becoming more popular as an alternative to traditional remittance methods. The group plans to increase the number of currencies that can be used for settlement in the future as demand for remittances using crypto assets continues to grow. The SBI Group further added that they will ensure measures to combat money laundering and terrorist financing, and carry out appropriate verification and monitoring of all involved parties.

As one of the key partners of Ripple, jointly promoting the use of XRP in Asia, the SBI group continues to play a key role in expanding the usefulness of XRP, introducing payments in the altcoin and driving its adoption around the world, despite the ongoing SEC v. Ripple legal proceedings. Reports indicate that the SEC's stance is that XRP is an unregistered security. However, SBI Holdings disagrees and considers Ripple as a digital asset rather than a security when accepting XRP payments.

The ECB resists pressure from global peers after Fed counterparts tightens

The European Central Bank's (ECB) slow approach to raising interest rates appears to be the right move despite most of its counterparts actively tightening, according to reports. Last week, global increases in borrowing costs were instituted in efforts to curb inflation, including an accelerated move of 0.5 points by the US Federal Reserve Board, the Bank of England's fourth consecutive rate hike, and Australia’s and Sweden’s Riksbank’s unexpected raise. However, Frankfurt authorities are not planning to make a move yet.

With the exception of the Bank of Japan and the Swiss National Bank, both facing much weaker inflation, the eurozone is now the only jurisdiction not raising interest rates.

Agnes Belaisch, Chief European Strategist, Baring Investment Services Limited, commented that the ECB does not need to go as far as their counterparts. Belaisch stated that the Russia/Ukraine conflict is slowing the economy, and some companies are cutting production due to rising energy prices, showing that ECB tightening has already resulted in a slowdown. Reports indicate that this is a steady stance adopted by eurozone policy makers, and financial markets predict a rate movement to be months away.

However, Bloomberg economists state that stronger inflation and an aggressive shift among ECB policymakers could indicate interest rates rising in September instead of December. Additionally monetary tightening aimed at controlling inflation will curb growth that is already weakened, economists added.

The ECB policy makers stated that their defensive stance is based on the fact that the 19-nation eurozone economy is different from their global counterparts. Christine Lagarde, President, ECB, commented that both the United States and Europe are facing rising prices, but are also faced with unique circumstances. Reports indicate that inflation in the UK, unlike the US, is primarily driven by supply-side shocks, and the fiscal stimulus is in position to offset cost pressures on consumers. Labour market stagnation is higher, potential growth is lower, and the conflict in Ukraine poses greater risk to the outlook in the UK. Economists also predict ECB will lower their record low deposit rate of 0.5% to zero.

U.S. regulatory agencies announce revised framework for the Community Reinvestment Act

U.S. federal regulators have issued a proposal to change the way they oversee banks and their community building activities under the Community Reinvestment Act (CRA). Federal Reserve System, Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency jointly released the long-awaited framework for the update of the 1977 Act, which takes into account the emergence of mobile/online banking as well as accurately defining the activities that would qualify for CRA credit.

Regulators who approved the proposed rulemaking stated that the new rule would be stricter. Martin Gruenberg, deputy director, FDIC, said the new rule would raise the bar for retail lenders to achieve highly satisfactory ratings. Furthermore, Rohit Chopra, Director of the Consumer Finance Protection Agency, Lael Brainard, Vice-Chair, Federal Reserve Board, and Martin Grünberg, Vice-Chair, Federal Deposit Insurance Corporation, issued a joint proposal on ordinances to update the implementation rules for the CRA.

Under this proposal, the regulatory agencies stated that they will continue to use the facility-based assessment scope as a key factor in determining whether a bank is in compliance with CRA obligations. Additionally, the new proposed rule advises large banks to assess areas where their retail lending is heavily concentrated, as well as aggregate activity in low- and moderate-income areas across the country. Regulators will also request that large banks include community development activities, regardless of location, to be described as a separate metric indicator.

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