(BBC) - The online payment service said that from 9 October: "Argentina resident Paypal-users may only send and receive international payments".
It has led to an increase in currency sales on the black market - but Paypal's exchange rates are better.
Locals were setting up two accounts under different email addresses and transferring money between the two, exchanging local currency pesos for dollars in the process.
The government's rules were designed to curb the flight of savings from the country and make the economy less dependent on the US dollar.
When the news was announced, finance minister Amado Boudou told the BBC it was "an important measure to combat tax evasion and money laundering".
Since the rules were introduced in November 2011, Paypal has been used as an alternative means of obtaining the US currency close to the official exchange rate.. Source/Origin >> Read More
