Historic Legal Innovation in Latin America: Argentina Approves BTC and USDC as Company Registered Capital

Recently, the Argentine Public Prosecutor’s Office (IGJ) officially approved a company that uses Cryptocurrency as registered capital, which is the first historic case in Argentina and even in all of Latin America. The company has BTC and USDC as initial capital, totaling about $500. Aiying previously mentioned Argentina’s innovation and market penetration in Virtual Money policy.

And today this move is another innovation, this pioneering event not only marks the first official application of Cryptocurrency in Argentine corporate capital, but also heralds the country’s recognition and acceptance of emerging digital assets in the legal framework.

1. Company Registration Process and Legal Innovation

1. Description of the registration process

The first company registered in Argentina using Cryptocurrency as capital had an initial capital of 0.00457621 BTC (Bitcoin) and 195 USDC, with a total value of nearly $500. Aiying summarized the entire registration process: According to Argentina’s Company Law (LGS), the value of all assets must be accurately calculated in transactions involving capital. Usually, when a company uses non-cash assets such as land or real estate as capital, the value of these assets needs to be confirmed through an auditor’s audit, and then a lawyer assists in transferring the ownership of these assets to the new company.

However, due to the use of Crypto Assets this time, the registration process is different. In order to ensure compliance with the requirements of the Company Law, it is necessary to engage accountants and notaries to certify the value of Crypto Assets during transfer and to verify the authenticity of the storage and transfer process of these digital assets. Specifically, BTC and USDC are first transferred to the hosted Wallets of Cryptocurrency exchanges Lemon Cash and Ripio registered in Argentina. These exchanges are subject to strict regulation to ensure the legal enforceability of these digital assets.

This custodial arrangement complies with Argentine law requirements for company capital, which requires that the capital of a company be seizable or used to repay debts in the event of legal disputes or financial issues. In this way, Cryptocurrency is legalized as part of the company’s capital and provides protection for subsequent legal procedures.

2. Regulatory New Rules for Virtual Asset Service Providers in Argentina

On March 22, 2024, the National Securities Commission of Argentina (CNV) issued Resolution No. 994, which aims to register and regulate Virtual Asset Service Providers (PSAV). This is to comply with the provisions regarding Anti-Money Laundering and Counter-Terrorist Financing in Argentine Law No. 25.246 and its amendments.

According to the provisions of law number 27.739, CNV has been designated as the regulatory agency for virtual asset service providers, responsible for creating and maintaining the relevant registration system. The system will record all individuals and businesses engaging in virtual asset transactions, including the exchange between virtual assets and legal currency, the exchange between virtual assets, the transfer of virtual assets, the custody and management of virtual assets, as well as Financial Service related to virtual assets. The following is the main content of the bill summarized by Aiying.

1. Main Content

• Registration Obligation:
• Individuals residing in Argentina or companies registered in Argentina, if engaged in virtual asset-related businesses, must register in the ‘Virtual Asset Service Provider Registration System’ created by CNV.
• Non-Argentine residents or foreign-registered companies must also register if they engage in virtual asset-related activities within the Argentine territory.
• Registration exception:
• If the total amount of virtual asset trading does not exceed 35,000 units of Purchasing Power Units (UVA) per month, which is equivalent to 10,000 US dollars, registration can be exempted.
• Registration requirements:
• Individuals and businesses engaged in virtual asset operations must provide detailed personal or company information, including name, Address, contact number, website, etc., and must ensure the accuracy and update of the information.
• Promotional Obligations:
• All registered virtual asset service providers must indicate on their website or other promotional materials that their registration is only to fulfill legal obligations and does not represent CNV’s endorsement or regulation of their activities.

2. Implementation time

The resolution will officially take effect on March 22, 2024, and service providers engaged in related businesses must complete registration within 45 days.

In addition, IGJ has also developed a series of regulations to ensure the transparency and accuracy of Cryptocurrency in corporate financial reporting. For example, it stipulates the valuation method of Cryptocurrency and how to correctly record these digital assets in financial statements. These legal regulations not only guarantee the legal operation of enterprises but also provide investors with more reliable financial information, enhancing market confidence.

3. The multiple advantages of Argentina’s move

Aiying believes that there are several advantages to incorporating BTC into social capital at the following levels:

• Strategic Financial Advantages: The company can now use the potential appreciation of digital assets as part of its financial strategy. Although the price of BTC is highly volatile, it is both a risk and an opportunity, and including it in the company’s capital can benefit the enterprise during pump in value.
• Enhanced attractiveness to investors: Companies holding digital assets may be more attractive to investors interested in blockchain technology and cryptocurrency, potentially attracting those who are tech-savvy and focused on cryptocurrency.
• Improve Liquidity and Global Coverage: Cryptocurrency is known for its high Liquidity and ability to facilitate international trade. By incorporating digital assets into the capital, companies can leverage these characteristics to enhance the flexibility and globalization capability of their operations.
• Clear regulation and increased confidence: IGJ’s regulation provides clear guidance on how to value and report digital assets in financial statements. This standardized approach aims to increase transparency and enhance investor confidence by ensuring consistency in the management and reporting of digital assets. This indirectly completes the function of the Virtual Money fund.

Aiying believes that Argentina’s decision to include BTC and other digital assets in the company’s capital sets a precedent for other countries, which may inspire more countries to adopt similar regulatory measures.

IGJ’s inclusion of encryption assets as part of its capital is a major update to Argentina’s company law. “This measure not only promotes the development of the encryption ecosystem and introduces a new adoption model, but also provides a safe and secure environment for the investment and operation of digital assets, a move that not only brings Argentina naturally into line with international trends, but also provides a clearer regulatory environment for businesses that incorporate Digital Money into their operations.”

4. Which other regions worldwide support Virtual Money as company registered capital?

In some countries and regions around the world, companies are allowed to use Cryptocurrency as registered capital or part of it, such as:

1. Switzerland

Switzerland is considered one of the global centers for Cryptocurrency and Blockchain technology, especially with its famous “Crypto Valley” located in the canton of Zug. Switzerland allows companies to use Cryptocurrency as part of their registered capital, and businesses can register and invest funds using Cryptocurrency such as BTC, ETH, and other Crypto assets. Switzerland’s friendly regulatory policies towards Cryptocurrency have attracted a large number of Blockchain startups to register in the country.

2. Singapore

Singapore is also a country that is open to Cryptocurrency, and its laws allow companies to use Cryptocurrency as part of their capital. The Monetary Authority of Singapore (MAS) has clear regulations on Cryptocurrency, allowing companies to use digital assets within the legal framework. Many blockchain and Cryptocurrency companies choose to register in Singapore because of its relatively relaxed policy environment and legal protection.

3. Estonia

Estonia is another country that is very friendly to Cryptocurrency. The country’s e-Residency program allows global citizens to register companies online and use Cryptocurrency as part of their capital investment. Estonia’s innovative laws and digital government initiatives have attracted many international Cryptocurrency and blockchain companies.

4. Malta

Malta is known as the “Blockchain Island”, and the country’s legal framework supports the use of cryptocurrency as part of registered capital for companies. The Malta Financial Services Authority (MFSA) has established detailed regulatory provisions that allow blockchain and cryptocurrency companies to operate legally in the country and use digital assets as capital.

5. Liechtenstein

Liechtenstein is a small country located in Europe, but its regulation of cryptocurrency and blockchain technology is very advanced. Liechtenstein’s Blockchain Act allows companies to use cryptocurrency as capital, and the legal framework is clear, ensuring that companies can legally incorporate digital assets into their financial structures.

6. Cayman Islands

As an offshore financial center, the Cayman Islands have also begun to accept Cryptocurrency as part of company registration capital in recent years. The relaxed policies and low tax environment here have attracted many Cryptocurrency and blockchain enterprises to register.

7. Hong Kong

Hong Kong is a major financial center and has taken a relatively open attitude towards Cryptocurrency. Although there is no explicit provision for the use of Cryptocurrency in registered capital as in Switzerland, in practice, some companies in Hong Kong have started to raise funds and make partial capital investments in the form of Cryptocurrency.

8. Bermuda

Bermuda is very friendly to Cryptocurrency, and the government actively promotes the application of blockchain technology, allowing companies to use Cryptocurrency as registered capital. Bermuda’s “Virtual Assets Business Act” specifically allows companies to use Digital Money for capital registration.

The practices of these countries or regions are similar to the situation in Argentina, all of which legalize Cryptocurrency within the existing legal framework and include it in the registered capital of companies.

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