Chile’s courts side with cryptocurrency exchanges over banks
Chile's crypto exchanges sued the banks over sudden account closures, and it seems to be going their way.
Chile's traditional and crypto financial institutions have been clashing, with the banks abruptly closing the country's cryptocurrency exchanges' accounts on 14 April. It seems to have been a coordinated move, with the Buda, Orionx and CryptoMarket exchanges suddenly losing accounts at Itau Corpbanca, Bank of Nova Scotia and the state-owned Banco del Estado de Chile.
"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.
As a consequence, Buda launched a lawsuit against ten banks, arguing that its account closures were arbitrary and unjustified.
The bank account closure followed by a lawsuit is becoming a well-trodden path. A very similar pattern recently took place in India, where crypto exchanges lost their banking under order from the Reserve Bank of India, and then followed it up with a legal challenge that has so far made it past the high court.
But in the case of Chile, it's already borne fruit for the exchange, and Chile's anti-monopoly court has ordered the state Banco del Estado de Chile and Itau Corpbanca to reopen Buda's accounts. The fate of the other exchanges' accounts is still in limbo, but with a precedent in place, it might not be too difficult for the others to get their accounts back as well.
The move had ripple effects beyond Chile, with many of those exchanges supporting customers in other parts of Latin America. Although it might have been a temporary disruption, there are signs that it was enough to push customers into less-safe peer-to-peer trading platforms, just as Torrealba predicted.
Disclosure: At the time of writing, the author holds ETH, IOTA, ICX, VEN, XLM, BTC and NANO.