Chile's State-Owned Bank Cutting Ties with Crypto Exchanges

Chile's public bank will terminate the accounts of three cryptocurrency exchange clients within 10 days, according to a local news report.

AccessTimeIconMar 30, 2018 at 7:30 p.m. UTC
Updated Sep 13, 2021 at 7:45 a.m. UTC

Chile’s state-owned bank has dumped three cryptocurrency exchange clients, according to a local media report.

Banco del Estado de Chile informed Orionx, CryptoMKT and that their accounts would be closed in 10 days, the newspaper El Mercurio reported Thursday. The move came after Canada's Scotiabank and Brazil's Itaú said they would be closing the accounts of the three exchanges.

The Chilean bank, more commonly known as BancoEstado, was the last institution still providing financial services to the three exchanges, El Mercurio reported. As a result of the bank's decision to cut them loose, the exchanges – reportedly the only ones in the country to obtain traditional bank accounts – will no longer have access to wider financial services.

The bank did not give a reason for the move, but said in a statement:

“BancoEstado adopted the decision, for now, not to operate with companies that are dedicated to the issue or creation, brokerage, intermediation or serve as a platform for calls or so-called cryptocurrencies.”

Even before BancoEstado severed ties, CEO Pablo Chavez said that without Scotiabank and Itau, his startup would “have to move to a different format,” possibly by opening a digital bank of its own. However, he described that option as being “very bad."

Similarly, CryptoMKT director and cofounder Martín Jofré said his startup was short on banking options prior to the BancoEstado bombshell. He added:

“That in no case means that customers could not recover their money or their cryptocurrencies … if that happened, the assets are simply returned to the users.”

In contrast, Orionx reportedly downplayed the impact of losing its last bank account, telling El Mercurio that customer funds "are fully backed and there is no risk of insolvency of them." No details were provided in the article to support this claim.

BancoEstado's decision comes amid increased scrutiny by regulators worldwide of banks providing services to crypto exchanges.

In particular, Japan and South Korea have recently been strengthening regulations around exchange accounts, focusing on investor protection, anti-money-laundering and know-your-customer rules.

Note: Some statements in this article were translated from Spanish.

BancoEstado image via CARLOS SALGADO MELLA/Wikimedia Commons


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