BANKS, FINTECH AND REGULATORY AGENCIES: SECOND RELEASE

Further to our previous article on this topic, we continue with other controversial issues regarding regulatory policies in Argentina.

Exchanges as “information sources” for AFIP.

Privacy and confidentiality regarding persons are some of the pillars of the crypto community. This fact evolved as of KYC (Know Your Customer) processes in order to identify persons behind each wallet seeking to dissipate the rumors that these assets were linked to illegal transactions.

Therefore, based on this development, most services providers for the purchase and sale of these assets have a database with information provided voluntarily by their users. AFIP has its focus on them to detect possible irregularities. Exchanges, at the same time, try to protect themselves being aware that any excess of information provided to tax authorities will result in detriment of their businesses (not for the existence of illegal transactions but to ensure their community some kind of privacy regarding transactions).

As of May 2021, Exchanges are obliged to fill in Form 8126 in order to report to AFIP all crypto transactions. We leave you this document for a better comprehension of the matter. In fact, they are monthly statements through which Exchanges report transactions over $ 10.000 (reason why it is very attractive to transact through overseas Exchanges).

As clearly explained in this article of Infotechnology, tax authorities have their own database from data collected from reported transactions. When the tax condition (mainly Individual Tax Payers and employees) does not match with the transactions’ volume of any tax payer (linked by the CUIT number); then, in such case, such tax payer will be investigated by AFIP to justify the expenditures involved.

These requirements for additional information are addressed to persons and to the Exchanges involved (in case of non-compliance, Exchanges are subject to penalties). Companies argue that they are discharged from the obligation to report additional data since transactions are made through bank wire transfers; this fact provides a great deal of comfort since banks, as regulated entities, are assumed to have conducted their own controls and provided relevant information to AFIP.

A similar conflict emerged when AFIP requested from Exchanges specific information on Argentineans moving “large amounts of capital”. On that occasion, the answer was similar: relevant information was already available to AFIP. They simply had to organize it properly, mostly considering the information regime imposed by the BCRA. For the time being, these answers are enough to release Exchanges from providing additional information related to their users.

Since 2014 Exchanges are obliged to request the origin of funds when big transactions are involved (though this obligation is doubtful from the legal point of view due to the lack of regulation); therefore, for the time being, the UIF is refraining from any type of intervention. Services providers agree that they are required information only in a case-by-case basis.

The FinTech Chamber’s position regarding regulation

We recommend to read the full communique which is a summary of the Chamber’s position regarding this matter. They agree that regulation should seek crime prevention through these platforms and assets but always aiming to protect this booming industry as a source of creation of value, employment and development. Any action should be agreed and consulted with the market players.

Regulation should approach clear rules to enhance investment, development and progress. At the same time, the sector’s development will result in a population with higher financial education (investors) highly skilled in science and technology (workers and employees).

The Chamber proposes a national framework legislation aiming to identify all market players and to establish clearly their rights and duties. This national law should allow flexibility to the Enforcement Authority in order to be aligned with such a dynamic market. Legislation should not be an obstacle for the booming development of the Argentine FinTech industry, which is expected to develop globally in the coming years. Obstructive legislation would undermine development, mostly considering that Argentina has one of the highest adoption levels in the world.

An interesting issue for debate (if any) is the position connected to transactions’ confidentiality and the obligation to report transactions imposed over companies and their users. The industry stands for the principle of confidentiality; disclosure of data to be accepted on exceptional cases. In this way, confidentiality – so important to the crypto community- should be kept. Finally, it is essential to establish that crypto transactions are irrevocable (as opposed to the e-commerce “cancellation button”).