Argentina's Attorney General Daniel Vitolo is one of many government officials who have friendly ties with the cryptocurrency movement “Crecimiento.”
Argentina's top regulator has been highly supportive of cryptocurrencies, with senior officials in President Javier Milley's government insisting that the technology is unstoppable.
“The reality is that this technology cannot be stopped. It is growing at an unprecedented rate. As regulators, we must take our role seriously to ensure we are not left behind,” said Argentina's Attorney General Daniel Vitolo, the top official in the central government of liberal President Javier Milley. He believes that by having authorities on board and building a pro-crypto framework that the country's curitimiento community is experimenting with, “the whole country will benefit.”
Crecimiento is a grassroots crypto-native movement that aims to establish a haven for cryptocurrency and technology founders in the Argentine capital of Buenos Aires. The goal is to work with the new Argentine government to provide incentives for the crypto industry, such as favorable tax regimes, funding and hassle-free business processes, to attract more foreign investment.
In August, Crecimiento launched a month-long pop-up city called Aleph in Buenos Aires. Its short-term goal is to create a sandbox, a safe space for regulators to test different processes, frameworks, and elements of what could become broader legislative elements in the future (if successful). Such temporary digital cities have been widely tested around the world, from Prospera in Honduras to La Unión in El Salvador.
In the longer term, some organizers are advocating for developing a special economic zone in Buenos Aires to foster the tech industry, as well as creating a national framework for cryptocurrencies in the country.
Global Potential
The mission makes sense for Argentina: For decades, the country has struggled with double- and even triple-digit inflation rates, capital controls, complex business processes, and a massive talent exodus. These realities have inspired one of the largest crypto communities in the world, with Argentina becoming home to some of the region's largest companies and a vast community of developers and crypto enthusiasts.
But what's happening at Aleph and Crecimiento could spread beyond the country's borders.
If successful, Argentina could become a haven for founders, developers, artists and investors in cryptocurrencies and broader technology. With Vitolo and other regulators touting the benefits of the technology, it may only be a matter of time before capital and developers start flocking to South America in search of a friendly regulatory environment to continue building out the ecosystem.
Special Economic Zone
Aleph has been pitched as a pop-up city: a temporary digital city that aims to experiment with legal frameworks and work with local businesses to figure out what it would take to achieve a broader tech-friendly environment.
“These pop-up cities create an environment for the dissemination of ideas and the development of projects,” Juan Bennett, founder of Protocol Labs, one of the main companies behind the Crecimiento movement, said in an interview before Aleph's launch. The idea is to create a physical place where people — founders, developers, enthusiasts — can come together “in close proximity” to discuss the many problems that affect a particular region or country and their potential solutions.
As well as pop-up cities, Bennett is also excited about the special economic zone (SEZ) concept that Aleph could spin off from.
SEZs are specific areas where business and trade laws differ from the broader national framework. They aim to increase employment, attract outside capital, create jobs, and experiment with different administrative structures. They offer lower taxes, less onerous business processes, labor regulations, specific laws on imports and exports, etc. to encourage businesses and investors.
There are hundreds of special economic zones around the world, from Chile to Dubai to Montenegro. Bennett added that he hopes Aleph will become one.
“Part of that might be building new startups, new products, new social structures, and maybe reviving a lot of the great technology that Argentines have built over the years,” he said.
Local Sandbox
Under the Aleph framework, a local sandbox is currently underway to test much of what Bennett and his team of local Argentinians in charge of the city have been testing.
Milagros Santamaria, head of Crecimiento's legal team, told Defiant that hundreds of local businesses have already signed up to the sandbox and are experimenting with accepting different tokens as payment methods, as well as using QuarkID, a self-sovereign identity app that allows consumers and merchants to maintain control over their data when transacting.
QuarkID is a digital trust framework developed by the City of Buenos Aires Government to create a new digital identity system, with security anchors via blockchain, giving people control over their own information.
Morfi, the most widely used token in the Aleph ecosystem, has been used in over 2,100 transactions, processing hundreds of millions of Argentine pesos, and is showing a clear upward trend.
Morfi token statistics. Source: Crecimiento
Santamaria said that later this month, her team will draft a report to present to Argentina's Financial and Technical Chamber, which will be added to a document submitted to Congress detailing the legislation at the federal level.
The sandbox “will inform us which documents companies ultimately need and which they don't need, and will help authorities determine what should and shouldn't be included in the broader legal framework,” she said.
Santamaria said her team has already received feedback from CNV, the Securities and Exchange Commission of India (SEC), including on what constitutes a token offering.
Crecimiento focuses on bringing together the diverse stakeholders in Argentina’s regulatory environment to help address all aspects of the business process, from paperwork to tax implications.
“This is not a short-term effort, and it's not just for Aleph, but we're really building with 30 to 40 years in mind,” Santamaria said.
That is why they are inviting all regulators to join in the construction: the country's Central Bank, CNV, the Financial Intelligence Unit (UIF in Spanish) and members of Milley's central government.
Current Regulatory Framework
Although Milley has yet to make an explicitly pro-crypto statement, the movement is pinning its hopes on his pro-business stance.
That said, the country has favorable regulations for the digital assets industry: in late December, Argentine authorities approved the use of Bitcoin and other cryptocurrencies for contract settlement.
And in March this year, authorities created a registry of virtual asset service providers, requiring companies doing transactions of more than ARS 27 million, or $30,000 per month, to register in order to combat money laundering in the country.
However, the central bank banned banks from offering clients exposure to cryptocurrencies last year, and this order remains unchanged.
Regulation Day
Regulators and key figures attending Aleph’s Regulatory Day last week spoke favorably of the digital asset space, reinforcing the argument that authorities are in favor of building an ecosystem.
These included Roberto Silva, head of the country's Securities and Exchange Commission, Attorney General Vitolo, Mario Adaro of the Mendoza Provincial Supreme Court and Diego Fernandez of the Buenos Aires city government.
Vitolo said the current regulatory regime for the technology has already seen some changes recently and that an update is necessary: Three weeks ago, regulators approved users to tokenize warrants and certificates of deposit.
Joining Vitolo, Argentina Securities and Exchange Commission (CNV) President Silva agreed, noting that the CNV recognizes the need to update the regime surrounding tokenization in order to bring a range of real-world assets (RWAs) on-chain.
Silva, the US equivalent of Gary Gensler, offered sobering words to an audience worried about possible official overreach.
“We will follow the law, but we're not going to over-regulate the industry either,” he said.
National Blueprint
Organizers hope that what happens at Aleph can provide clear guidance for the rest of Argentina.
While Buenos Aires is a very innovation-friendly city, Santamaria says, there are plenty of other cities that Aleph will be excited to see what comes out of the special economic zone currently underway. “Córdoba, known as a rebel city for its forward thinking, is very technologically advanced and will probably be keeping a close eye on what's going on here,” she says.
Mendoza is no different: Not only Santamaría and three members of the Crecimiento core team are from this small western city just up the Andes mountain range, but also Mario Adaro, a judge at Mendoza's Supreme Court who was present at last week's regulation day.
Argentina is becoming a pioneer in crypto-friendly innovation, and local governments agree on two key points: they want the industry to grow, but they don't want it to get out of hand.
For Santamaria, the clear goal is to “provide predictability for businesses to come and stay.”
