Tuesday, April 23, 2024

ECONOMY | 22-01-2024 15:06

Argentines have over US$100 billion in undeclared cryptocurrencies

Argentina’s government and specialist consultancy firms estimate that citizens hold more than US$100 billion in digital cryptocurrencies that haven’t been declared before the authorities. President Milei’s Emergency Decree and the Omnibus Bill could lead to a gradual whitewashing of these digital assets.

President Javier Milei’s government step to allow the execution of contracts in any currency could lead to the authorisation of business deals in digital cryptocurrencies. 

Authorities believe that Argentines already hold as much as US$100 billion in undeclared digital currencies, a figure that coincides with estimates from the increasing number of consultancy firms that specialise in crypto-assets.

President Milei’s emergency DNU decree has already authorised the execution of contracts in any currency. That possibility does not only allow for the collection and payment in US dollars – it also clears the way for deals in cryptocurrencies. 

However, in order to make such deals, the digital assets must be previously declared before the AFIP tax agency. And therein lies a big problem: most crypto-assets are not recorded or registered with the authorities in Argentina.

Thousands of professionals providing services abroad – most of them linked to the world of programming and IT – are living in that grey area. According to several experts from public opinion consultancies, many of those professionals voted for Milei.

Many are professionals receiving payments in platforms where money is not declared to AFIP, through accounts opened via companies such as Payoneer Global Inc, a US financial services company offering online money transfer and digital payment services (these days, the firm is making unwanted headlines due to the enormous fraud committed against many of its Argentine clients and in other countries by alleged hackers).

In order to be able to use those cryptocurrencies, citizens must declare them, declare their purchase and profit rates, and pay the appropriate personal asset and income tax. This is what Milei’s government is counting on – the mass whitewashing of previously undeclared wealth would bring huge tax income.

Pablo Reyes, CEO of the crypto wallet SaldoAr, warned that “those wishing to enjoy the benefits” afforded by cryptocurrencies “will have to expand their liability with clarity about a sector featuring informality.”

Concurring with the Argentine authorities, Reyes estimates that citizens hold more than US$100 billion in untaxed cryptocurrencies.

Foreign Minister Diana Mondino says that Argentines can already enter into contracts for cryptocurrencies. According to Manuel Beaudroit, the CEO of app Belo, “to enable the signing of contracts in other currencies provides more certainty, flexibility and openness” to businesses and workers.

The government’s measure has been read as a strong endorsement fore digital assets. Yet it must be taken into account that before paying a salary, or paying for a service in cryptocurrencies, the source of the funds must be justified before the authorities. 

“Cryptocurrencies are just another asset in the economy and they are recognised in tax laws. Income tax regulations include in the second category any income provided by cryptocurrencies,” warned Félix Rolando, a tax expert and partner at Andersen consultancy firm. “There is even a 2022 opinion by AFIP holding that the treatment that must be given to cryptocurrencies within personal assets is like a financial instrument. People have the obligation to declare it.”

Another topic to be taken into account is that international money-laundering regulations take into account cryptocurrencies, to the extent that various national, continental and global agencies may require platforms and crypto exchanges to comply with certain standards for crime prevention. 

These regulations require the gathering of information on senders and recipients of crypto transactions, as well as holders of cryptocurrency wallets or purses.

As Milei insisted on the campaign trial, and has been evidenced by the financial system for decades, Argentines save and think in frankly any currency other than the peso, because throughout history inflation has eaten up their savings and, in many cases, their life savings. 

In that context, it is a phenomenon that has increased greatly over the last few years, Argentina is already in the top 10 countries with the greatest interest in and holding of cryptocurrencies, and it is also the third nation with the most dollars per inhabitant after the printer itself, the United States, and Russia, according to data from such international organisations as the International Monetary Fund.

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