Santiago Escobar A company has decided to get ahead of banks’ entry into the crypto sector by launching Argentina’s first crypto asset custody bunker.
It comes at the end of the public consultation launched by the National Securities Commission (CNV, by its Spanish initials) on regulations that would authorize new providers of cryptocurrency purchase and sale services to operate in the local market.
Prosegur Crypto is Prosegur Cash’s institutional digital asset custody service. On Tuesday, the company announced the opening of Argentina’s first cold cryptocurrency custody bunker. It is only the second such facility in Latin America, marking a milestone in the development of crypto asset security in the region. The project aims to get ahead of what it sees as the private banking sector’s “inevitable” entry into the crypto industry.
With the consultation process finished, the CNV is expected to publish Argentina’s first regulations on exchanges, virtual wallets, and individuals who provide crypto assets. However, this would involve a long adaptation period of between 120 and 270 days, depending on the kind of service provider. Official sources told the Herald’s sister title Ámbito that they expect it will not fully enter into force until late 2025.
Nonetheless, Prosegur is already talking to financial institutions, with a view to being in the right place at the right time when it happens, they said.
“As crypto operations grow in the institutional and corporate environment in Argentina, driven by the implementation of new regulatory frameworks, the ‘crypto bunker’ is a perfect combination of physical security and digital protection for financial institutions seeking to provide digital asset custody services to their clients,” said Hernán Ball, director of innovation at Prosegur Cash.
A need for crypto risk management
According to data compiled by the company, financial institutions lost around US$2 billion to custody problems in 2023, stemming from both technological failings and attacks on custody systems. The alarming figure underscores the critical necessity of implementing robust risk management strategies for digital asset custody.
Prosegur Crypto has built a cold custody vault for digital assets in Buenos Aires, similar to those launched in Madrid, Spain, in 2021 and Sao Paulo, Brazil, in 2023. The development makes it the first global security company to enter the crypto market and offer an integral model and service. The company has already received CNV authorization to operate in the Argentine market with its new vertical.
As part of the launch, the company also inaugurated a blockchain node inside the custody bunker. It makes it possible to replicate all the information stored in the technology’s networks, guaranteeing that the data are highly secure and cannot be modified.
The company says it is an innovative system that includes several layers of digital and physical security that function together to protect their clients’ digital assets. In principle, these clients would be banks seeking to allow crypto asset operations on their online banking apps. This, together with the highly restricted access and strict security protocols, raises the level of protection offered.
This happens in a context in which Argentina has become the main crypto market in Latin America. It surpassed Brazil in estimated inflow of crypto assets between July 2023 and June 2024. According to an October report by Chainalysis, crypto users in Argentina deposited a total of US$91 billion in that period, above the US$90 billion in Brazil.
Argentina’s swift adoption of crypto
The swift adoption of cryptocurrencies in Argentina is related to the constant struggle against inflation and the devaluation of the peso. This phenomenon also attracts major players in the industry, who are making business decisions in the face of this promising panorama for the country. Banks, it is clear, want a part of it: it was recently revealed that financial institutions have already petitioned the Central Bank to be able to sell cryptocurrencies on their online platforms.
Chainalysis highlighted that the Argentine market for stablecoins is one of the largest in the world in terms of transaction participation. In the year through June 2024, 62% of crypto transactions nationally involved stablecoins, compared with 60% in Brazil. That percentage is significantly above the global average of 45%, although slightly below Colombia’s 66%.
The crypto asset vault, also called a “bunker” because of its high levels of security, is based on patented cold storage technology. It guarantees security, trustworthiness and availability for high-value digital assets. These are stored in cold wallets that hold clients’ private keys offline. The bunker has over 100 protection measures distributed across six levels of security to guarantee the chain of custody.
Clients’ assets, therefore, are not used or moved for any purpose except custody. It also holds mechanisms to allow clients to use their crypto assets automatically, securely, and almost immediately.
In this way, the security company is prepared to offer solutions relating to digital currencies of central banks, electronic pagments, and issuance and acquiring services. Additionally, they mentioned that they have a special service to manage digital assets seized by law enforcement in cases of crimes related to cryptocurrencies.
