Banks and cryptocurrency exchanges clashing in Chile
Cryptocurrencies and fiat currencies are colliding, via banks, around the world.
Banks in the South American nation of Chile abruptly cut off the country's cryptocurrency exchanges on 14 April, closing down the accounts of the country's major exchanges. The move was exacted in tandem, with the Buda, Orionx and CryptoMarket platforms suddenly seeing accounts at Itau Corpbanca, Bank of Nova Scotia and the state-owned Banco del Estado de Chile shut down.
No explanation was given, except by Banco Estado which said that it had decided "not to operate with companies that are dedicated to the issuance, creation, brokerage, intermediation or serve as a platform for the so-called cryptocurrencies."
The exchanges have taken their case to an appeals court, although accounts remain closed in the meantime.
"They’re killing an entire industry," said Guillermo Torrealba, Buda's co-founder and chief executive officer. "It won’t be possible to buy and sell crypto in a safe business in Chile. We'll have to go back five years and trade in person."
"It seems very arbitrary," he added, saying that Buda self-regulates and complies with KYC and AML (know your customer and anti-money laundering) laws the same as any bank.
Chile's exchanges were relatively prominent locally, with Buda and CryptoMarket operating across Latin America and doing about $1 million of trades a day before their accounts were closed.
The shutdown-via-bank manoeuvre is similar to what's been going on elsewhere. Recently, India's cryptocurrency exchanges have been similarly threatened with the cutting of their bank ties between cryptocurrency and fiat currency.
It's not the same as an outright ban, but it has very similar results by making cryptocurrency much more difficult and dangerous to trade, and pushing it back into the back alleys.
The problem might also go beyond exchanges. The Tether cryptocurrency is simply a digital coin pegged to the US dollar, and ostensibly backed by US dollars held in a bank account somewhere. This was recently thrown into doubt as the Tether company dissolved relations with its auditor, causing some to speculate that the company didn't have enough fiat currency to back up its issued cryptocurrencies. However, a more recent analysis suggests that it could have enough money, but is running into trouble finding a bank willing to store it.
The Chilean appeals court case is still pending, but the bank accounts remain closed in the meantime.
Disclosure: At the time of writing, the author holds ETH, IOTA, ICX, VEN, XLM, BTC and NANO.
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