Bank of Nova Scotia and state-owned Banco del Estado de Chile closed the accounts of cryptocurrency exchange platforms Buda, Orionx, and CryptoMarket in March 2018 with no explanation.
While the cryptocurrency exchanges have gone to an appeals court to challenge the bank’s actions, their bank accounts remain closed. Unfortunately, Chile’s financial institutions appear to be implementing a total and complete ban on the digital currency industry. “Hopefully the appeals court will see we’re right,” said Guillermo Torrealba, Buda’s co-founder and chief executive officer.
According to Bloomberg, South American cryptocurrency enthusiasts are worried that the Chilean government’s regulations and policies may soon follow the stricter cryptocurrency nations like China which have banned cryptocurrencies and ICOs.
Chilean Government May Be Responsible for Closing Bank Accounts
Chile’s local press reports speculated whether the closing of the cryptocurrency exchanges’ bank accounts was ordered by the government, especially since Chile’s Financial Stability Council (CFSC) had a negative stance towards the cryptocurrency industry and its associated risks. The suspicious concerns were also related to the CFSC’s members which included representatives from Chile’s Ministry of Finance, the Central Bank and securities, banking and pension fund regulators.
Itau Copbanca, the chief executive officer of Milton Mulhy, however, believes that the Chilean banks are not to blame. The banks are not against cryptocurrencies and are actually in support of emerging technologies and startups. From his perspective, the shutdown of the cryptocurrency exchanges’ bank accounts, is a result of internal banking rules and lack of regulations from the Chilean government.
While it’s uncertain whether the government or banks are responsible for the closure, Chileans believe that the closing of the cryptocurrency exchanges’ bank accounts are “killing an entire industry,” said Torrealba. “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.” While the Chilean cryptocurrency community was small, it was also growing rapidly. Buda traded about $1 million per day before the bank closed its account.
Torrealba appears outraged by the banks’ decision, stating that his Chilean cryptocurrency exchange Buda, also follows the same standards as the finance industry. These standards include knowing their customers, continuously running checks with local and international authorities, and only accepting bank transfers.
Brazilian Government Uncertain about Bitcoin Regulations
Unlike Chile, according to LatinFinance, Brazil has not yet barred cryptocurrency exchanges from conducting business. However, the lack of regulations and direction is also causing a lot of frustration and confusion from the general public.
“There is no definition from either the Central Bank or the legislature, whomever it may be,” said Rodrigo de Campos Vieira, a partner at local law firm TozziniFreire.
The Brazilian people, however, appear open to regulations, especially if it could bring further clarity to the situation. “Regulations would help solve the imbroglio regarding bank accounts being shut down,” said Luiz Roberto Calado, chief economist at Mercado Bitcoin. “Our understanding is that virtual currencies are a means of payment and therefore should be regulated by the central bank. Meanwhile, ICOs should be regulated by the CVM [Brazil’s securities and exchange commission].”
TozziniFreire noted that regulations, however, had to be implemented “the right way” so that Brazil can benefit from the technology. Unfortunately, it is extremely hard for governments to know which regulations would benefit their country most, especially when cryptocurrencies and blockchain technology are very disruptive.