Chilean banks shut down cryptocurrency accounts

Banks in South America’s wealthiest nation are turning their noses up at cryptocurrencies.

Chilean trading platforms Buda, Orionx and CryptoMarket are trying to find ways to continue operating in Chile after Itau CorpBanca, Scotiabank and state-owned Banco del Estado de Chile closed their accounts last month with no explanation.

The exchanges have complained to an appeals court, which agreed to hear their case, but the bank accounts remain closed.

It is a common struggle for cryptocurrency businesses worldwide to find a reliable banking partner, and Chile’s financial institutions seem to be implementing a blanket ban on the industry.

While it is not clear if the shutdowns are at the government’s behest, cryptocurrency fans are worried the nation is moving toward policies seen in Chinmaya and South Korea, which have banned cryptocurrency trading and initial coin offerings.

“They’re killing an entire industry,” Buda cofounder and chief executive officer Guillermo Torrealba said. “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.”

Chile’s cryptocurrency market is small, but burgeoning. Locally based exchanges like Buda and CryptoMarket operate across Latin America.

Buda traded about US$1 million per day before losing its bank account, compared with about US$2 billion for the world’s biggest exchanges.

Buda is self-regulated and complies with the same measures the financial industry goes through to know its customers, such as running checks with local and international authorities, Torrealba said.

Itau CorpBanca chief executive officer Milton Maluhy on March 27 said that the bank supports start-ups and new technologies, but cryptocurrency is an industry that still needs more regulation and the bank is following internal norms to decide on closing individual accounts.

Chile’s banking association declined to comment. Scotiabank and BancoEstado did not reply to requests for comment.

Local media reports have speculated that the orders to shut accounts might have come from the government.

The finance ministry did not reply to an e-mailed request for comment.

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