Argentina’s crypto adoption hopes dim after Milei’s LIBRA memecoin scandal

The controversy has turned what was once a promising regulatory path into political quicksand, leaving Argentina’s crypto landscape in turmoil.

The promise of crypto regulation in Argentina, once fueled by the rise of pro-crypto president Javier Milei in late 2023, has come crashing down as hopes for progress in the sector’s regulatory framework vanish following the scandal surrounding memecoin Libra (LIBRA).

Industry experts in Argentina say that any chance of tailored crypto regulation—once seemingly within reach due to Milei’s outspoken support for the industry—has now evaporated. In fact, the entire sector may become politically radioactive for the libertarian administration, which is still set to govern for the next three years.

Optimism in the crypto community quickly turned to disillusionment this week after Milei faced backlash for endorsing Libra, a memecoin that plummeted in value shortly after his mention on “X.” The crash sparked allegations that Milei was involved in a “rug pull” scam, where creators reportedly drained over $100 million in funds.

Now, the president risks facing impeachment charges brought forward by the opposition. Although the effort is unlikely to succeed—given the opposition’s lack of votes—the controversy is sure to be a political headache for Milei’s administration. This comes at a time when Argentina was celebrating record economic gains in his first year as president but is now staring down the barrel of a new political crisis.

A deep mark on Argentina’s crypto landscape

As the dust settles, the scandal has left a deep mark on Argentina’s crypto landscape. It seems that the once-promising path to regulation is now riddled with doubt, and Milei’s crypto-friendly reputation may never fully recover.

Bitcoin Argentina founder Rodolfo Andragnes told Cointelegraph, 

“It feels like it sets back everything we’ve been building. I think the government will now be afraid to touch anything related to this, and crypto as a whole risks becoming a taboo topic for the administration.” 

According to Andragnes, there was a lot of anticipation within the community for progress following Milei’s rise, particularly within Argentina’s National Securities Commission—akin to the SEC in the United States—as well as in other regulatory bodies. The hope was to bring more legitimacy to a rapidly growing industry in the country. Argentina’s crypto community is one of the strongest in the region, especially in terms of developers, and adoption is significant; there is now widespread disillusionment over the reputational damage the Libra scandal is expected to inflict on the national ecosystem.

Argentine judge María Servini was assigned as part of an investigation on Feb. 17 into President Javier Milei’s involvement in promoting a cryptocurrency that nosedived, marking the latest twist in a scandal that threatens to derail the libertarian leader’s momentum.

The controversy erupted late Feb. 14 when Milei endorsed the obscure cryptocurrency Libra in a post on X, sparking a brief surge in its value. However, the president quickly deleted the post and denied any connection to the digital coin, which soon tanked.

Related: LIBRA, Solana drama: Meteora co-founder resigns, Jupiter begins probe

Argentina’s fintech chamber suggested the incident could be a classic case of a “rug pull” scam—where a coin’s creators attract a flood of investors, driving up its value, only to abruptly cash out, leaving investors with worthless tokens.

As the investigation progresses, the scandal has cast a cloud over Milei’s administration, fueling questions about his connections to the crypto industry and potentially hindering his political momentum. Argentina’s presidential office stated on Feb. 15 that the decision to delete the post was made to prevent “speculation” following public backlash over the cryptocurrency’s launch.

In a subsequent interview, Milei denied receiving any financial benefit from endorsing the memecoin, which has since plummeted in value. While maintaining that he acted in “good faith” and has “nothing to hide,” Milei admitted to having “lessons to learn” from the controversy, including the importance of “setting filters” on what is deemed appropriate behavior. The libertarian leader emphasized that any fallout from the token launch should be confined to the parties directly involved, stating, “The state has no role here.”

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.