A court of appeal has ruled in favor of one of many Chilean cryptocurrency exchanges taking banks to court for illegal account closure. The banks in question are Santander, Banco del Estado de Chile, Banco de Crédito e Inversiones (BCI), Scotiabank, and Itau Corpbanca.
Chilean cryptocurrency exchanges winning?
Chilean cryptocurrency exchange, Orionix, has won its case against Banco del Estado. Banco del Estado is the only government-owned bank in Chile. According to the court, the closure constituted –
“an arbitrary and illegal action, which constitutes a deprivation of the right protected by Article 19 No. 2 of the Political Constitution of the Republic, that is, the right to equality before the law.”
The court further acknowledged that while there were certain risks associated with cryptocurrency transactions, this was not a legal basis for closing accounts. It is not in itself evidence of criminal practice, and the banks acted prematurely in what appears to be a unified front to stop providing services to Chilean cryptocurrency exchanges and other blockchain related companies.
The banks are arguing that the accounts are resistant to AML and KYC policies due to the nature of the activities. The Chilean court is indicating that it is the banks’ duty to establish policies to deal with this and that they could have done more to accommodate the accounts before the surprise closure.
One of the Chilean cryptocurrency exchanges, Buda, won a case to reopen the accounts while the case was being heard. Buda is one of the more highly regarded exchanges operating in the region. The antitrust court has since ordered three banks to reopen the accounts for the duration of the cases.
The battle against banks continues
While Orionix seems to have scored a victory, the battle between banks and exchanges is continuing on multiple fronts. Orionix is suing six banks in total for abuse of power. Buda is currently taking on ten banks for illegal account closure.
And Chile is not the only place where cryptocurrency exchanges are having a difficult time. In India, exchanges have had to cease operations altogether. The Supreme Court of India has ruled that the ban will continue. The same court also barred all other courts from hearing petitions on the matter.
The Reserve Bank of India is claiming that because bitcoin is not made of metal, it cannot be treated as a currency, an argument that many contend as archaic. However, there is a hearing on July 20th, and perhaps Indian exchanges can attain the same relief that Chilean cryptocurrency exchanges seem to be enjoying. These cases are very important in establishing the legitimacy of cryptocurrency and will have huge business implications. An active bank account is the difference between a live exchange or a dead one. And without exchanges, people will not get exposure to cryptocurrency and its associated benefits.
Digital Nomad with an interest in Zen and Blockchain technology.
Law graduate with 3 years experience as a consultant in the capital markets industry and 4 years experience freelancing on UpWork as a Creative Writer.