Alejandro Arrieche
Authorities in Argentina have raided several mining farms in the country for the first time amid allegations that the equipment used for this activity illegally entered the country.
The country’s tax collection agency, AFIP, led the raids and reportedly seized 142 mining rigs and 1,355 video cards from a location in the Buenos Aires province. Other raids were also executed in the provinces of San Juan and Córboda but authorities did not provide details about the equipment they seized as a result of these operations.
According to the AFIP’s official press release, the Buenos Aires-based mining facility was raided as the company was registered for a business activity different than the one it was actually performing.
Authorities claim that this is a typical ‘modus operandi’ for crypto mining firms, which use a legal front to justify the amount of electricity the equipment consumes by stating that they engage in some sort of industrial activity.
In addition, the proceedings sought to obtain further data about how the equipment was brought to the country to verify if the owners followed the corresponding customs protocol to import the devices.
“The partnership under investigation, which was recently incorporated, did not count with sufficient equity for the acquisition of the equipment it owned”, a translation of the agency’s official statement reads.
Is Crypto Mining in Argentina Illegal?
Crypto mining in Argentina is not illegal. However, the country has imposed restrictions on foreign currency exchange and charges elevated customs taxes for importing foreign goods.
In many cases, mining facilities operate in secret as they aim to take advantage of the lower power rates charged to residential users to increase the profitability of their activities.
Authorities appear to be cracking down on these operations as they hurt the country’s finances and the reliability of its power grid.
In May, several registered crypto mining firms were hit with dramatically higher power bills as authorities are struggling to sustain their energy subsidies extended to the population to alleviate the impact of the country’s high inflation rates.
Aside from industrial-level operations, Argentinians have also turned to crypto mining at a smaller scale to generate extra income to cope with the deteriorating purchasing of the country’s domestic currency, the peso.
The nation’s low residential electricity costs, which average around $5 per month in the Buenos Aires province, allow individuals to carry out these operations profitably.
Cryptos Provide an Escape from The Country’s Sky-High Inflation Rates
Cryptocurrencies have provided an escape for Argentinians who are struggling to cope with the nation’s elevated inflation levels. In July, the annualized inflation rate surged to 71% while analysts expect to see prices nearly doubling across the economy by year end.
To prevent the nation’s foreign exchange reserves from being depleted, the government has imposed restrictions on the amount of US dollars that Argentinians can have access to.
Argentinians have many ways to produce money by investing in cryptocurrencies via staking, lending, and other similar activities.
Moreover, they have opted to use stablecoins to save money in what they deem as “hard currency” to protect the purchasing power of their holdings. Peer-to-peer exchanges facilitate the task of converting pesos into stablecoins such as USDT and USDC.
Many establishments have also started to accept cryptocurrencies as mean of payment due to their rising popularity. Authorities have not yet presented a thorough regulatory framework for digital assets but the country’s central bank has banned financial institutions from offering crypto-related services.
Data from Triple A indicates that 2.4 million people in Argentina own cryptos – a figure that corresponds to approximately 5.2% of the nation’s population. Meanwhile, the country ranked 13th in terms of crypto adoption according to the latest report from blockchain analytics firm Chainalysis ranked.
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This article was written for Business 2 Community by Alejandro Arrieche.
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