A landmark ruling in Brazil means that banks can shutter cryptocurrency-related accounts without justification.
On Tuesday, October 9th judges on the third panel of the Superior Court of Justice, Brazil’s second-highest court, took just 30 minutes to find in favour of Itaú Unibanco in a complaint from cryptocurrency exchange Mercado Bitcoin (Bitcoin Market). The court ruled by a majority vote that banks closing the current accounts of cryptocurrency exchanges does not violate the law, nor does it constitute a rights abuse under the country’s consumer protection code.
Local news site Portalo de Bitcoin reports that this is the first case of its kind in Brazil, and that the decision sets a new legal precedent that could affect other pending Bitcoin banking cases.
Brazillian exchanges have not had a good time of it of late. In August, the personal account details of 261,000 investors in Atlas Quantum’s exchange were leaked for sale on the dark web. Now, it appears that Brazillian exchanges may be forced offshore or overseas to operate.
Giving banks the absolute right to block accounts operated by cryptocurrency businesses will drastically affect the entire country’s market. Natália Garcia the legal director of Foxbit, Brazil’s largest exchange by volume, was quoted (via Google Translate) as saying: “Being banked is essential for the business. I do not want to sound fatalistic, but an unfavourable decision can end the industry.”
Justice Nancy Andraghi, a Minister of the Superior Court, had argued that closing exchanges’ current accounts amounted to an abuse of rights because it denied brokers the “essential infrastructure” to carry out their commercial activity.
“The current accounts can be understood as a kind of essential infrastructure without which it is impossible for the applicant to compete or even be economically active in its expressive market,” she reasoned.
But Andraghi was a lone voice as the Superior Court dismissed the complaint. The Bitcoin banking ruling stands, marking a time of terrible news for Brazil’s nascent – and growing – cryptocurrency businesses.
Mercado Bitcoin has been contacted for further comment, but had not responded at time of publication.