The only bank in the South American nation of Chile that works with cryptocurrency exchanges has decided to stop servicing their accounts, according to local paper El Mercurio.
Specifically, Banco del Estado de Chile, operating as Banco Estado, is cutting ties with Buda, Orionx, and CryptoMKT.
The bank said in a statement: “Banco Estado has decided not to interact with companies that issue or generate cryptocurrencies, that provide brokerage and intermediary services with cryptocurrencies, and do not serve as a platform for crypto exchange transactions.”
Orionx offers Bitcoin trading, and has a daily volume of $83,000 according to coinmarketcap.com. The other two are not listed on that website. Buda offers Bitcoin trading, while CryptoMKT transacts mainly with Ethereum.
According to local news source emol.com, Orionx said in a statement last Thursday that it had been informed in a letter from the bank that its account was to be closed. The letter said: “BancoEstado adopted the decision, for now, not to operate with companies engaged in the issuance or creation, brokerage, intermediation or serve as a platform for calls or so-called cryptocurrencies.”
In response, Orionx criticised the bank for its “incorrect and anti-competitive” decision. It assured customers that their funds are fully backed and that “there is no risk of insolvency”, and added: “We hope that before this process is finished, we will already have a new solution to continue operating Orionx.”
Buda and CryptoMKT were also informed that they had 10 days to finish their business with the bank.
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Banco Estado is the only public bank in Chile and was created by government decree in 1953. It performs all of the Chilean government’s financial activities through a single account managed by the national treasury. It is the third-largest bank in the country but the biggest mortgage lender and issuer of debit cards.
According to El Mercurio, Banco Estado was the last bank in the country to service cryptocurrency exchanges following the recent decision of other Chilean banks to close their cryptocurrency-related accounts too. In response, Buda and Crypto MKT urged the national banking association to clarify its stance. They reminded the association that they have safeguards to protect customer money, that they pay tax, and that they are registered with the relevant financial authorities, as reported by Bitcoin.com.
They don’t seem optimistic of their prospects. Martín Jofré, director of CryptoMKT, said that his startup had few options remaining, and Buda head Pablo Chavez said that his company might have to open its own digital bank, calling that option “very bad” according to tecnologia.press.
Last year the future of blockchain technology in Chile seemed brighter.
In May, the Santiago Exchange partnered with IBM to introduce blockchain technology to the country’s financial sector, the first stock market in Latin America to do so.
In June, the governor of the Chilean central bank said in a speech that he recognised the benefits of blockchain technology and that financial innovation shouldn’t be “choked at birth”.
And in September, the country’s banking regulator, the Superintendencia de Bancos e Instituciones Financieras, joined R3, a consortium of more than 100 banks and financial institutions dedicated to developing distributed ledger technology for traditional financial systems. The head of the SBIF said at the time: “Financial regulators must make constant efforts to understand, encourage the creation and implement innovations through early discussions with institutions wishing to adopt these new technologies or with the entrepreneurs who are creating them.”