On December 6, the Third Chamber of the Chilean Supreme Court officially sided with the state-owned BancoEstado after it banned a local crypto exchange by shutting down its bank account.
Orionx, a digital asset trading platform based in Chile, filed an appeal with the supreme court following an abrupt termination of its account by BancoEstado. Ultimately, the court ruled the case in favor of the bank, reaffirming that the bank cannot obtain sufficient information to monitor transactions and determine the identities of the senders of crypto payments.
The court ruling read:
“These characteristics and elements determine, therefore, the current impossibility for the Bank to comply with the aforementioned obligations, since it prevents it from knowing in depth the financial activities related to cryptocurrencies developed by the appellant, the most relevant characteristics of its operations, the foundations on which these are supported and, finally, if their amounts are excessive or not.”
Downfall of the Chilean Crypto Market
The global crypto exchange market has become highly competitive with key players like Japan, South Korea, and the U.S. dominating the vast majority of digital asset trading volume and activity.
One common element in the cryptocurrency-related policies implemented by the three countries is that banks are permitted and encouraged to provide stable banking services to cryptocurrency exchanges.
In South Korea, for instance, the Financial Services Commission (FSC) recently approved banks to work with cryptocurrency-related business, and the Seoul Central District Court ruled a high profile case between a major commercial bank and a small local cryptocurrency exchange in favor of the exchange, establishing a strong precedent across the industry.
Following the court ruling, attorney Kim Tae-rim, the representative of the exchange, said:
“Cryptocurrency exchanges, by default, have the right to freely deposit and withdraw funds to and from major banks in South Korea, and an abrupt termination of partnership and services by the bank [in this case Nonghyup] without sufficient evidence or reasoning falls under the breach of contract,” the attorney said.
With access to banking services and insurance, cryptocurrency exchanges in Japan, South Korea, and the U.S. have been able to primarily focus on growth and adoption, without being in conflict with regulations and commissions.
As more countries like Singapore, Malta, and the U.K. move towards the implementation of practical and efficient regulatory frameworks surrounding digital assets, regions that deny cryptocurrency businesses the simplest of requirements like a stable banking service could struggle in remaining relevant in the highly competitive global cryptocurrency market.
Throughout the past eleven months, at least three major Chilean banks including Itau Corpbanca, Bank of Nova Scotia, and BancoEstado unilaterally shut down the bank accounts of most of the country’s largest cryptocurrency exchanges.
Some banks like the state-owned BancoEstado even have a strict policy in place that prohibits the establishment of a relationship or a partnership of any sort with a cryptocurrency company.
In a period in which the G20, a forum of government officials from 20 of the largest economies in the world, is moving towards regulating the global cryptocurrency market, the inability to read market trends and follow lead of consortia like the G20 could result in isolation that may create a challenging environment for Chile’s local cryptocurrency sector to grow in the long run.
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Last modified: March 4, 2021 3:14 PM