The Process of the Virtual Asset Service Provider (VASP) Registry in Argentina - Fireside

Well, in this uh case, I have the opportunity to make an interview with Roberto uh who is the president of our national securities commission as knows as the regulator. Right. Well, honestly uh for me it's great to see how these kind of conversations uh are happening in these spaces because at the end of the day we need institutions to to make more and more adoption in crypto. Um today it's becoming normal to see regulators, bankers and fintex in these panels uh sharing their thoughts in these kind of spaces. [snorts] So Roberto thanks again uh for being here and let's dive in.

Um today we will talk about the BASP registry or the proto registry. So the first question is how did the idea of creating a formal registry for BASP first emerge? I know. Good morning everybody. Thank you Diego for the invitation.

It's a pleasure to be here. We want to be friendly. Let me let me start by saying that. Um long story. I had a life in private practice.

And then two years ago I became a regulator. And when I became a regulator, CNB, which is a securities regulator here in Argentina, had almost nothing to do with the crypto world. But things happened and something changed along the way. Essentially, Argentina was up for the fourth round of evaluation between before the FAF FATF, Financial Action Task Force, Gaffy in Spanish. Um, and it needed to comply with a number of things.

One of the thing things he needed to comply was to have a the BASPs as a reporting entity for moneyaundering purposes. Long story short, that resulted in a law being passed and in that law CNB was chosen as the regulator. That's not an obvious choice. It's many countries use the security regulators. However, there are countries like Brazil, neighboring Brazil, which uses the central bank is is entitled to regulate the the VASPs.

That's what happened last week when eventually after long consultations they decided to regulate the vasps and uh it's not the obvious choice in other countries where there are integrated supervisors in which they have all the functions or for example if you go to Salvador that they have their own national commission or the same I believe happens in Dubai with VA. So we were appointed as regulator. We had to come up with with a registry very quickly. In the registry eventually we registered up to 165 people. Um the registry was simple.

Very few data you had to provide. However, if you didn't provide that data, you couldn't operate in Argentina. So eventually from the from the registry we moved into a full registration. That took us quite a while. I'm I'm talking about March last year.

So eventually in March this year, we passed the final regulation after a few consultations also and that's an integral regulation of of BASP. We think it's a reasonable regulation um and it's kind of friendly but of course it is a regulation [clears throat] and currently we have around 100 people registered in the registry more or less but that's not a final number because we are still reviewing applications so that's an ongoing process. Um but if you want I stop here and and we pick up.

Yep. I I'll stop here and we'll pick up with the next question or [clears throat] should I go on whatever?

Let's talk about the challenges. So what were the main obstacles?

The [clears throat] main obstacles. Imagine a new technology easy for all of you. Uh imagine a traditional security regulator. Imagine traditional actors that look at the digital economy and the digital actors with a a lot of disbelief is disbelief is probably a very gentle word. Um imagine again traditional regulator we had to quickly adapt to a new world and and worse than that we had a mandate in the law.

The mandate is to regulate BASP using the securities uh principles I would say which are rather harsh. Of course you have to take care of investor protection and many other things. So we found out that we wanted to have a a friendly regulation. We did we wanted to foster innovation. We certainly didn't want to kill any innovation.

And there was a difficult balance to be struck there in which um we had to move from we had to move from one side to the other. One side being the the principles that the law contain to what we wanted to do but we certainly want to be a regulator which is pro- innovation pro technology. So that's uh uh we we had a clear north of where we wanted to go and again remember that one of the things that as a security regulator we have is a two contracting principles on the one hand we need to develop the market and then on the other hand we need to protect investors so that's a that's a difficult balance I would say

and well we have time for for one more question and it's uh what impact have you observed so far in the market?

Okay, we saw a lot of interest in Argentina. I think the the crypto phenomenon in Argentina preceded us. We didn't we didn't invent it or anything like that. Argentina is being crypto for a number of reasons. Among those reasons are exchange controls and a lack of currency, but there are many more reasons like everywhere else in the in the world.

So um uh we had a large local ecosystem and and uh our challenge was uh to bring these players into the regulation which is what we are striving to do again with a difficult principles and [clears throat] uh and then the challenge of bringing the the big players into Argentina again and then regulation which wants to be friendly but it is a regulation. So there's a number of things you need to comply from from forming a a company in Argentina and you need to have capital in Argentina. You need to have manuals. You need to have people that deal with the public and with the regulator. You need to segregate your accounts.

You need to have a uh technology manuals and and IT systems. So there's a number of things that you need to comply. However, under our model, we do not um force [clears throat] you to operate in Argentina. So you can operate abroad with your Argentine company. You only need to have a local presence.

Um but if you do have that, you have to promise us that uh we can also look at the international operations that in everything that has to do with Argentina. So you cannot close the door on us and and tell us now that's a different company. So that's that's very important for us. And um I think that's about it. But if if you want to talk about anything else or tokenization, we can go into that.

Well, if you want [clears throat] to talk about organization, that's right. Well, we are here in in Deep Connect. So, there are a lot of companies, protocols and blockchains here in Argentina and probably a lot of them they probably consider to came to Argentina after that. So, if you want to talk about the tokenization framework, we have time.

Yeah, I think regulation of BASP gave us a great insight and and and a great impulse. And so, we didn't want to stop there. We we said we should have a tokenization regime [clears throat] and we couldn't pass a law because of the political situation. So we had to look at the existing framework and the conclusion of the existing framework was that we can only that every security in Argentina had to be issued in in um what's it called certified form or book entry and and had to be deposited with our depository which is called kahores. So that was a very difficult start because we we killed we killed the native tokenization from the minute zero.

So nonetheless he said we we want to do this and and it came to us that we were able to uh create a digital representation which was simultaneous with the other representations. So we we call the tok organization the gender and the digital representation the species. What we have now is that a particular species in which we have a a traditional security let's call it tokeniz security being able to be also in the digital world. So but the the physical security exists uh it is deposited in with a with a depository there's a holder record and then you can issue the digital representation which [clears throat] can be up to 100% so you can be totally in the in the digital world if you want or you can have one feed on each world and the the digital representation only moves in the digital world that is BASP that register be an exchange a platform whatever and again you can coexist on on both words and um and you can go back as forth back and forth as many times as as as you want. So ideally or ideally no initially I would say not ideally we think there's going to be hybrid issuances in which we don't think anybody's going to go 100% digital from day one.

We think people are going to issue more in the traditional market and eventually move into the digital market for secondary trading. That's at least what we were what our expectations are uh on the discussions we've had with people with actors of the sector. And um we did it under a sandbox regime in which um it's going to be a one-year test and after a year we'll re-evaluate how how we did and whether we want to continue with the process or not or we need to amend it. But it's essentially a one-year sandbox sandbox test. And um it's a sponsored project.

So the the issuer has to participate um and you have to participate with a different BASP no more than five that of course have to be registered with CNB.

Well we talk about uh the bus registry we talk about the tokenization framework and what's next. That's the big question. the this time of the year many people ask me what if we look two years forward and I said what if we look two years back

well yeah two years back

I would still be sitting in the law firm I had no intention of becoming regulator no idea I would become one so that's always a very tough and difficult difficult exercise but if we want to look forward I think we we do have the main regulations that's a big advantage h we need to start having more subjects and more products on that. So that we need to consolidate eventually one day we need to think what's going to happen to decentralized actors and [clears throat] and whether we'll bring them into the regulation or not. We don't have a definition. I think looking forward we are going to need a bit a few bit more definitions on what a virtual asset or crypto asset is. uh we have a clear definition now and we use like in the US our definition of securities includes investment contracts.

So we do apply how we test although it's a foreign a foreign case law but we do apply that and and and with that in mind our primary conclusion although it's a case by case conclusion is that most spiritual assets are not [clears throat] included within our regulations but uh that's not necessarily the case like like the the SEC we have concluded maybe we did before but we have concluded that meme coins are not securities that stable coins are not securities it is to extent they don't pay in yield. So that's um that's a few definitions but maybe going forward we we need to make more definitions. We we're going to take our time for that and and you might of course ask me about about stable coins and again I just said stable coins are not under my jurisdiction. But eventually they could be under the jurisdiction of the central bank to the extent that the central bank concludes they are part of the payment system but that's something in which eventually the central bank may come up with a regulation or not we don't know that. Well we are running out of time so I really want to say thanks for your participation and thanks for the work that the CNB are doing in Argentina.

Um well in my personal opinion I expect the next year will be the greatest year for Argentina for capital markets for to organization for exchanges and for crypto. And again thanks for the participation.

Okay thank you Diego. Thank you everybody. Enjoy Buenosides.