In recent times, it seems like cryptocurrency traders and enthusiasts are always at war with the banks in their respective countries. Murky regulatory standings and an outright lack of purpose-built framework have been causing difficulties for digital currencies since their inception years ago.
When looking for a recent example of this, you do not need to look far. For example, in Ireland last summer, what was reported to be the only bitcoin brokerage in the country closed its doors. The company to close was Eircoin and bosses at Eircoin blamed all of the country’s banks for refusing their business. They have also accused the Banking and Payments Federation of discrimination.
With this in mind, we will be looking at five different people and their companies, exploring their battles against the banks in their respective countries.
Name: Guillermo Torrealba
Guillermo Torrealba is the CEO and founder of the South American crypto exchange, Buda. The exchange was founded in 2015 and carries out operations across South America in a number of countries, including, Chile, Brazil and Peru. They are currently headquartered in Santiago, the capital of Chile.
The climate for cryptocurrencies in Chile and South America as a whole has not been very encouraging in the last few years. Despite them not being outlawed, banks are frequently deciding to close or freeze the bank account of numerous exchanges. This crackdown has been causing larger exchanges to relocate and smaller ones to go out of business entirely.
Buda is one such exchange that had fallen victim to the banks in Chile. In April 2018, financial institutions across the country stated that they would be closing the accounts of Buda and two other exchanges, OrionX and CryptoMarket. One of the reasons for this was provided by the CEO of Itau Bank, Milton Maluhy who stated that cryptocurrencies in the country required stronger regulation.
As a result of this, Buda and OrionX decided to sue a number of banks within the country, claiming that the sudden closure of their banking facilities was unjustified. Torrealba also went on the record to discuss a difference in how Chile presents itself and the reality of how the country actually operates. He stated “Chile is showing its “B” side, that of being an extremely conservative country, even though we make huge efforts for the world to see us as liberals.”
The CEO of Buda also blasted the banks in Chile, stating that they have positioned themselves as regulators, despite there being no specific cryptocurrency regulations in Chile. “There hasn’t been one regulator, legislator or government official saying that cryptocurrencies aren’t legal, it was just the decision of a very powerful sector of the economy: the banking industry.”
For the duration of the lawsuit, the Chilean Court of Defence of Free Competition (TDLC) ordered a temporary injunction on the banks, preventing them from closing Buda’s banking facilities until a verdict had been reached in their case.
In January 2019, the banks requested that the TDLC lift their injunction against them, which prevents them from closing the exchange’s accounts, however, the TDLC has denied this request. The request was made on the merits of the verdict reached in the Supreme Court’s case between OrionX and the banks, whereby the court agreed that the bank acted legally in closing their account.
The TDLC reached their conclusion, stating that the verdict reached in OrionX’s case does not constitute a new, legal precedent that can overrule their decision.
The situation for Buda is still unfolding and it will be interesting to see how the case concludes, surely, crypto enthusiasts in South America and all over the world will be eager to see what transpires.
Name: Jaryd Koenigsmann
Jaryd Koeingsmann is the CEO and founder of the Australian crypto exchange, myCryptoWallet, which launched in 2017. My CryptoWallet. The exchange provides a number of services to their clients, including allowing the deposit of fiat currency, withdrawal services, with a live peer-to-peer market. They offer the instantaneous exchanges between the Australian Dollar, New Zealand Dollar and various digital currencies.
Earlier this month, customers of myCryptoWallet received an email from the company with some dire news. myCryptoWallet’s banking partner, National Australia Bank (NAB) had elected to close the company’s bank account, without prior warning. Obviously, without access to their bank account, the exchange wouldn’t be able to pay their customers.
As a result of this closure, myCryptoWallet informed their customers that withdrawals would be unavailable for the time being. On the other hand, they have set up new accounts so that they can still process deposits.
From the email, myCryptoWallet have stated that NAB had not at any point provided the exchange with any information surrounding this unexpected closure. When pressed for information NAB responded that the exchange would receive a response within 5 working days.
In retaliation, this myCryptoWallet elected to file a formal complaint to the Australian Financial Complaints Authority (AFCA). As a direct result of this complaint, the AFCA has instructed that NAB provide a response by the 6th of March. Furthermore, the exchange has taken it a step further and declared that they would be filing a lawsuit against NAB on grounds of damages and gross negligence.
myCryptoWallet have also actively encouraged their clients to file their own complaints to NAB, in an effort to pressure the financial institution into action. They have also noted in their email that they have had their account shut down previously. In response to this, they took further steps to implement anti-fraud measures into their platform, including a state-of-the-art KYC method. This utilizes VIX Verify, with integration into Australia’s own government databases.
This volatile situation is still unfolding however myCrptoWallet has shown that they won’t be taking the situation lying down.
Youval Rouach is an Israeli entrepreneur who is the founder and CEO of Bits of Gold. Bits of Gold, also commonly referred to as BoG is a privately owned brokerage founded in 2013, that specializes in cryptocurrency trading. BoG provides a platform for members of the Israeli public, where they can buy and sell Bitcoin and Ethereum in exchange for Fiat currencies such as Israeli Sheqels’, Euros’, and US dollars. In addition to this, BoG also helps to develop financial SaaS products and create payment solutions for other businesses.
BoG currently has over 50,000 customers who have registered with them and this number is constantly increasing. In 2017 alone, they experienced a 250% increase in their customer numbers. Examples of their clients include private investors, high-level tech firms, finance firms, investment firms, not-for-profit organizations and many more.
Rouach and BoG have been fighting against the banking system, in an effort to show that cryptocurrency entrepreneurs are here to stay.
During 2015, the second largest bank in Israel, Bank Leumi had placed restrictions that forbade transactions to and from BoG’s business bank account. The reasoning that they gave was based on regulatory issues within the current cryptocurrency industry and decree from the Bank of Israel, in addition to BoG allegedly violating the law. Furthermore, Bank Leumi had considered BoG’s website as a “gambling site”, this was due to the perceived level of risk involved in investing in cryptocurrencies.
In 2017 BoG decided to fight back in an effort to get this prohibition removed, and began a lawsuit against Bank Leumi. During the case, BoG cited the fact that they are professionally regulated and that they have operated with sterling conduct since their founding in 2013. The lawsuit first appeared in the Tel Aviv District Court. Despite a heavily contested legal battle in the court of the first instance in which the court allegedly praised BoG’s conduct, the verdict was ruled in favour of Bank Leumi.
In response to the decision, BoG decided to take an appeal to the Israeli Supreme Court. The result of the appeal was more encouraging for BoG and other cryptocurrency exchanges in the country. The decision was reached and Supreme Court Justice Anat Baron placed a temporary injunction on Bank Leumi which prevents the bank from placing any restrictions on BoG’s bank account until a full decision has been made in the appeal against Bank Leumi. The legal battle could take years, however, this is a big win for the cryptocurrency community and for the time being, it shows that cryptocurrency changes cannot be ignored.
When commenting on their decision, the Supreme Court stated that they did not agree with Bank Leumi’s allegations of BoG being a high-risk company which has violated Israeli law. This was due to the fact that the District Court found that BoG has acted transparently and that they have not violated any specific laws during their operations.
When asked about the landmark decision, Shaul Zioni, who is BoG’s legal counsel from the firm Phillipsdorf Phillippe was quoted as saying. “This is a precedent-setting decision whose importance can not be overemphasized in relation to the trading of digital currencies,”
If the ruling, in this case, is upheld and restrictions on the bank account of cryptocurrency trading firms are prevented, it will be a great step forward for the cryptocurrency market in Israel. If this transpires, it will be down to the actions of people like Youval Rouach and BoG.
Name: Igor Hjelmstrom Vinhas Ribeiro
Position: CEO & Founder
Igor Hjelmstrom Vinhas Riberio is the CEO and Founder of Walltime. Walltime is a Brazilian, privately held startup that was founded in 2014 and operates within the digital currency market. They are headquartered in Campinas, San Paulo and claim to be the most recommended crypto exchange in Brazil, whilst being the fourth largest. They claim to process thousands of transactions, using their own technology which they have developed since their founding.
They help to serve their customer base, which consists primarily of Brazilians, with a large number of international clients also, to exchange either fiat currency for digital currency or vice-versa.
Walltime is the smallest for-profit organization on this list by size, but their story is no less important.
Walltime, like a number of crypto exchanges operating in South America, had fallen victim to their bank freezing their account. In a statement from their lawyer, Graziela Brandão went on the record to state that Walltime’s banking partner, Caixa Economia Federal’ (CEF) had frozen their business bank account with any warning on the 22nd of March 2018. At the time of the freeze, the company’s bank account held 800,000 Brazilian Reals, which to the equivalence of US Dollars, stood at around $212,000.
Inevitably, the freeze of the bank account had prevented Walltime’s customers from either withdrawing funds or depositing funds into their trading accounts. This also had an adverse effect on the exchange’s ability to gain new customers and to retain their existing ones, which resulted in a decrease in revenue, which put them at great risk.
The turmoil led to Walltime filing a lawsuit, led by the previously mentioned Graziela Brandão on the 2nd of April 2018. Walltime also made the argument that CEF’s actions violated regulations from the Brazilian National Monetary Council which demands that banks must provide a written explanation to a customer whose account is being closed.
Interestingly, Walltime had already lost similar legal battles with Itaú Bank, Bradesco and Banco Brasil. These three institutions had all suspended Walltime from using their services. Walltime commented in response to these verdicts, stating that the presiding judges in those cases did not have an understanding of how banks had certain responsibilities as trustees, which were not being adhered to.
In the initial stages of the case, the courts sided with Walltime and granted a temporary injunction against CEF, which prohibited them from placing these restrictions on Walltime until the final verdict has been handed down in the case.
It will be interesting to see how the rest of the legal battle plays out and the result will surely have a massive effect on the regulatory field in Brazil’s crypto market.
Name: Filip Pawczyński
Company: Polish Bitcoin Association
Filip Pawczyński is the Chairman of the Polish Bitcoin Association (PBA), a not-for-profit organization that was founded in 2013. The Association was established with the goal of maximizing the Polish public’s awareness of Bitcoin and other cryptocurrencies. They help to provide key knowledge on the subject to Polish citizens, with the aim of promoting a financial system that does not require the banks.
Some of the members of the Polish Bitcoin Association include legal professionals, business owners, accountants and general cryptocurrency enthusiasts. In addition to disseminating knowledge to the public, they also lobby their government and financial institutions with regards to the tax and regulatory field of cryptocurrencies.
In the summer of 2018, the PBA accused Poland’s local banks of carrying out targeted discriminatory practices against cryptocurrency-based organizations. Despite the fact that Poland does not have any specific cryptocurrency regulation to speak of, the regulatory field in the country is notably hostile. The accusations were caused by the alleged refusal by the banks to provide financial services to companies that are involved in digital currency practices.
According to the PBA, the situation for these firms is dire. They stated that 15 banks within Poland had refused to provide any bankings services to 52 different companies related to cryptocurrencies. Furthermore, it is alleged that these financial institutions have also closed down or frozen the bank accounts of 25 different firms, greatly restricting their ability to operate.
As a result of this, the PBA elected to plead to Poland’s Office of Competition and Consumer Protection (OCCP), in a bid to lift these restrictions placed by the banks. At this time, we have not received any word on whether the OCCP will be investigating this matter as they have not released any correspondence relating to this case.
One section of the complaint raised by the PBA to the OCCP reads as follows. “The effects of the banks’ actions described clearly aim at removing virtual currency entities from the market, despite the fact that such activities are legal and conducted with dignity. In view of the above, action by the regulators is necessary, and this notice and his requests are fully substantiated.”
As previously mentioned, cryptocurrencies are not actually illegal in Poland, however, the attitude of financial institutions in the country towards cryptocurrencies are not productive for the industry. As a result of this, many crypto exchanges are leaving Poland. For example, in May 2018, Bitbay (At the time, the largest crypto exchange in Poland) had decided to leave Poland and move their offices to Malta to escape the restrictions placed on them by Polish banks.
The climate for cryptocurrency in Poland does not look bright at the moment, however, it is promising that organizations such as the PBA are willing to try and take the fight to the banks, without rolling over and accepting their decisions