Brazil: Antitrust Watchdog Sends Questions to Crypto Exchanges After Bank Account Closures
The anti-trust regulator in Brazil has asked crypto exchanges a list of questions about their bank accounts, which were abruptly closed in the past few months. The story has also been covered by local news publications, including financial newspaper Valor Econômico on October 19, 2018,
Ten Brazilian cryptocurrency exchanges and one private/OTC (over-the-counter) dealer have been given till October 19, 2018, to answer a questionnaire from the country’s antitrust authority, The Brazilian Administrative Council for Economic Defense (CADE).
Failure to respond to the questionnaire can attract a daily fine of 5000 Brazilian Real per day and can reach as much as 100,000 Real, or approximately USD 25,000. While CADE has only just issued the questionnaire to the companies, it has also been investigating banks since last month. They have been accused of their position in an exploitative manner, specifically by closing accounts belonging to several exchanges.
The investigation started back in September with banks receiving the first questionnaire. The second survey was sent to cryptocurrency companies on October 1, 2018. The exchanges and brokers include Bitcoin Market, BitcoinTrade, Bitcambio, Walltime, Foxbit, BitBlue, Braziliex, Open Digital Capital (OTC), Profitify and e-Juno.
The survey starts by asking for the identity and contact information of the individual that is completing the survey. It then proceeds to ask for detail on how well the exchange is performing in the region. A few questions later, the regulator directly approaches the account closure topic by asking whether the company has been affected by the banks’ actions. The rest pertains to how each cryptocurrency exchange has been handling customer data and the anti-money laundering measures being taken.
The Brazilian banks in question, including Bradesco, Itaú, Banco Santander, Banco do Brasil, Inter and Sicredi, have also submitted responses to a different CADE survey issued last month. They argued that the lack of regulation had brought increased risk to them, which resulted in the termination of accounts as a precautionary measure. Bitcoin and other cryptocurrencies have long been criticized for being lucrative to malicious actors by governments around the world.
In response, the regulator noted that “the lack of proper classification and regulation” did not make the sector illegal. It continued, “The crypto-currency brokerage market is a new market, and it is only natural that there should be a time lag between the emergence of new markets and their regulation.” Nevertheless, CADE is now also asking cryptocurrency exchanges what they declared their line of business to be during the account creation process.
Banks versus Cryptocurrency
Brazilian banks are not the only ones targeting accounts belonging to cryptocurrency brokers and exchanges. On April 5, 2018, the Reserve Bank of India (RBI) issued a notice to all registered financial institutions requiring them to cease business with all digital currency exchanges.
A statement released by the country’s Central Bank explained:
“It has been decided that, with immediate effect, entities regulated by RBI shall not deal with or provide services to any individual or business entities dealing with or settling VCs. Regulated entities which already provide such services shall exit the relationship within a specified time. A circular in this regard is being issued separately.”
Since exchanges in India no longer have access to the banking network, cryptocurrency users were suddenly stripped of all fiat-crypto corridors. While some companies moved to a peer-to-peer model after the ban, others have since shut down trading entirely.