Banco Estado, the last bank in Chile offering cryptocurrency related services has closed three accounts belonging to three cryptocurrency trading platforms.
The bank has decided that henceforth it will not deal “with companies that are dedicated to the issuance or creation, brokerage, intermediation or serve as a platform for the so-called cryptocurrencies,” El Mercurio, a news outlet in Chile reports.
A notice by the bank sent to one of the exechanges says the decision was taken “in accordance with the power provided in the Accounts Contract.”
Process Not Transparent
In the letter to the Association of Banks and Financial Institutions of Chile, the exchanges complained that the process was not transparent and left in the hands of a few people. The letter translated to English says the decision to close the accounts stems from “fear, misinformation or perhaps by strategy.”
Cryptocurrency exchanges in the country had recently called on the bank association to clarify their position regarding cryptocurrencies. The association wrote back saying the issue should be resolved “in the context of each individual relationship of each banks with its customers.”
This comes after accounts belonging to BUDA and Crypto MKT were shut down by other banks. On seeking clarification, the exchanges were informed that the banks had instructions not to open cryptocurrency related accounts.
Crypto MKT cofounder Martin Jofre’ has then said the exchange would have no option but to refund its customers if left with no banking services. Crypto MKT facilitates Bitcoin and Ether trading.
BUDA had a more radical idea – to open a digital bank to allow it continue providing services. Its is not however clear how this can be implemented.
BUDA held an account with Banco Itaú Chile while Crypto MKT held an account with Scotiabank. Both were shut down earlier this week, La Segunda reports. A letter to BUDA announcing the move reportedly cited the lack of regulatory recognition.
Considering Alternatives
Crypto MKT is also considering other payment alternatives which were overlooked because of their associated costs, Crypto MKT’s commercial Manager Daniel Dupré told BNamericas.
The exchange had reportedly been working with Banco Estudo, the state lender on blockchain related issues because the shock decision came.
The exchange has about 30,000 customers in Chile and about 50,000 in the South American region. Users can buy cryptocurrencies on the platform using local fiat currencies.
In a joint statement, the two exchanges Crypto MKT and BUDA expressed their dissatisfaction with the move noting that they are registered with the Chilean Financial Analysis Unit and pay VAT. Additionally, they claim they comply with ant-money laundering and anti-terrorism financing guidelines as well as providing users with a safe platform.
Demonization of Cryptocurrencies
“They’ve demonized cryptocurrencies because they don’t understand the technology. It’s important that as a country and industry, we have guidelines to grow the cryptocurrency market in a healthy and legally compliant manner,” Guillermo Torrealba, one of BUDA’s cofounders said after the accounts were shut.
Scotiabank CEO responded by saying the exchanges were not being persecuted and that the banks were simply doing their job. Banks have previously voiced concerns over money laundering.