The Argentine Judicial Inspection (IGJ) recently approved the registration of a company with cryptocurrency as its registered capital, making it the first company in Argentina and Latin America to do so. The company used Bitcoin (BTC) and USDC as its initial capital, totaling about $500. This innovative move not only marks the first official application of cryptocurrency in Argentine corporate capital but also signifies the country’s recognition and acceptance of emerging digital assets within its legal framework.
The registration process and legal innovations for company registration are as follows:
Registration Process Description:
According to Argentina’s Companies Law (LGS), the value of all assets must be accurately calculated in transactions involving capital. Typically, when a company uses non-cash assets such as land or real estate as capital, an accountant’s audit is required to confirm the value of these assets. Then, a lawyer assists in transferring the ownership of these assets to the new company.
However, in the case of using cryptocurrency, the registration process is different. To ensure compliance with the requirements of the Companies Law, an accountant and a notary must be hired to certify the value of the cryptocurrency during the transfer and verify the authenticity of the storage and transfer processes. Specifically, Bitcoin and USDC are first transferred to the custody wallets of the Argentine national registered cryptocurrency exchanges Lemon Cash and Ripio. These exchanges are strictly regulated to ensure the legality of these digital assets.
This custody arrangement complies with Argentine law’s requirement for company capital, which states that the capital must be seizable or used to repay debts in the event of legal disputes or financial problems. By doing so, cryptocurrency as part of a company’s capital can be legalized and provides protection for subsequent legal procedures.
The Argentine National Securities Commission (CNV) released Resolution No. 994 on March 22, 2024, which aims to register and regulate virtual asset service providers (PSAV). This is in compliance with the provisions of Argentine Law No. 25,246 and its amendments regarding anti-money laundering and counter-terrorism financing.
According to Law No. 27,739, the CNV is designated as the regulatory authority for virtual asset service providers and is responsible for establishing and maintaining the registration system. This system records individuals and companies engaged in virtual asset transactions, including exchanges between virtual assets and fiat currencies, exchanges between virtual assets, transfers of virtual assets, custody and management of virtual assets, and financial services related to virtual assets. The main contents of the law are as follows:
Registration Obligations:
Individuals residing in Argentina or companies registered in Argentina must register in the “Virtual Asset Service Provider Registration System” established by the CNV if they engage in virtual asset-related business.
Non-residents or companies registered overseas must also register if they conduct virtual asset-related business within Argentina.
Registration exceptions:
Registration can be exempted if the total amount of virtual asset transactions does not exceed 35,000 units of purchasing power units (UVA) per month, equivalent to $10,000.
Registration Requirements:
All individuals and companies engaged in virtual asset business must provide detailed personal or company information, including names, addresses, contact numbers, and websites, and must ensure the accuracy and updating of the information.
Promotion Obligations:
All registered virtual asset service providers must indicate on their websites or other promotional materials that their registration is for legal compliance purposes and does not represent permission or supervision of their activities by the CNV.
This resolution came into effect on March 22, 2024, and existing service providers have 45 days to complete their registration.
In addition, the IGJ has formulated a series of regulations to ensure 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 companies but also provide more reliable financial information for investors, enhancing market confidence.
The inclusion of Bitcoin in social capital has several advantages:
Strategic Financial Advantages:
Companies can now use the potential appreciation of digital assets as part of their financial strategy. Although Bitcoin is highly volatile, this can be both a risk and an opportunity, allowing companies to benefit from its increased value.
Increased Investor Attraction:
Companies that hold digital assets are more attractive to investors interested in blockchain technology and cryptocurrency. They may attract investors who are knowledgeable about technology and focused on cryptocurrency.
Enhanced Liquidity and Global Coverage:
Cryptocurrencies are known for their high liquidity and ability to facilitate international transactions. By incorporating digital assets into their capital, companies can leverage these characteristics to enhance operational flexibility and global capabilities.
Clear Regulation and Enhanced Confidence:
The IGJ’s regulations provide clear guidelines 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. It indirectly fulfills the function of a cryptocurrency fund.
Argentina’s decision to include Bitcoin and other digital assets in corporate capital sets a precedent for other countries and may stimulate the adoption of similar regulatory measures.
By including cryptocurrency assets as part of registration regulations, the IGJ has made a significant update to Argentine corporate law. This measure not only promotes the development of the cryptocurrency ecosystem but also introduces a new adoption model, providing a secure and reliable environment for investment and operations with digital assets. This move not only aligns Argentina naturally with international trends but also provides a clearer regulatory environment for companies incorporating digital currencies into their operations.
In a global context, there are other countries and regions that allow companies to use cryptocurrency as part or all of their registered capital, such as:
Switzerland is considered one of the global centers for cryptocurrency and blockchain technology, especially its famous “Crypto Valley” in Zug. Switzerland allows companies to register and invest capital using cryptocurrencies such as Bitcoin and Ethereum. Its crypto-friendly regulatory policies have attracted many blockchain startups to register in the country.
Singapore is also a country that maintains an open attitude towards cryptocurrencies. Its laws allow companies to include cryptocurrency as part of their capital. The Monetary Authority of Singapore (MAS) has clear regulations on cryptocurrencies, allowing companies to use digital assets within the legal framework. Many blockchain and cryptocurrency companies choose to register in Singapore due to its relatively relaxed policy environment and legal protection.
Estonia is another cryptocurrency-friendly country. Its e-Residency program allows global citizens to register companies online and use cryptocurrency as part of their capital. Estonia’s innovative laws and digital government initiatives have attracted many international cryptocurrency and blockchain companies.
Malta is known as the “Blockchain Island.” Its legal framework supports companies using cryptocurrency as part of their registered capital. The Malta Financial Services Authority (MFSA) has established detailed regulatory rules, allowing blockchain and cryptocurrency companies to operate legally in the country and use digital assets as capital.
Liechtenstein is a small European country but has advanced regulations for cryptocurrency and blockchain technology. 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.
The Cayman Islands, as an offshore financial center, has also started accepting cryptocurrency as part of company registration capital. Its lenient policies and low-tax environment have attracted many cryptocurrency and blockchain companies to register there.
Hong Kong is a major financial center and has taken a relatively open attitude towards cryptocurrencies. Although there is no explicit regulation allowing the use of cryptocurrency as registered capital, some companies in Hong Kong have already started raising funds and using cryptocurrency as part of their capital.
Bermuda is very cryptocurrency-friendly. The government actively promotes the application of blockchain technology and allows companies to use cryptocurrency as registered capital. Bermuda’s “Digital Asset Business Act” clarifies that companies can use digital currency for capital registration.
These countries or regions’ practices are similar to the situation in Argentina, where cryptocurrency is legalized and included in the scope of company registration capital within existing legal frameworks.