Brazil’s Regulatory Agency Probes Top Banks for Closing Crypto Brokerage Accounts

According to a Reuters report published on September 18, 2018, Brazil's Administrative Council for Economic Defense (CADE) has launched a probe into the conduct of six major banks within the country.


The clash between traditional banks and crypto brokerage firms is set to escalate again in Brazil.

According to a Reuters report published on September 18, 2018, Brazil’s Administrative Council for Economic Defense (CADE) has launched a probe into the conduct of six major banks within the country.

The antitrust regulator is looking into allegations that the banks have sought to monopolize the market by engaging in practices that make it hard for crypto brokers to operate.

CADE wants to establish the truth behind allegations that several of the leading banks in Brazil restricted access or/and closed the accounts operated by trading platforms.

The Reuters report states that the country’s regulator initiated the investigation at the Brazilian Blockchain and Cryptocurrency Association (ABCB)’s request, who indicated that it had received numerous complaints.

In one of the complaints lodged with ABCB, a brokerage firm called Atlas Quantum claimed that Banco do Brasil unexpectedly closed its account.

This incident and many others have prompted the investigation that implicated top banks like the aforementioned Banco do Brasil.

The full list of banks listed in the investigation includes:

  • Banco Santander Brasil
  • Banco Bradesco
  • Itaú Unibanco Holding
  • Banco Inter
  • Co-operative Bank Sicredi

Reuters quotes CADE’s oversight mandate, stating that it is possible the banks have imposed restrictions or prohibited crypto brokers from accessing services provided by these financial institutions.

According to the antitrust regulator, these move “can bring losses” to cryptocurrency businesses.

In June, the blockchain association requested CADE to ask banks to stop closing accounts and where it had happened, for new ones to be opened. However, the regulator did not oblige that request.

On their part, the affected banks have maintained that the broker accounts they closed did not provide all relevant details about their clients.

The banks accused several brokerage firms of failing to comply with anti-money laundering/know your customer (AML/KYC) requirements, and thus the accounts they created were deemed invalid.

Regulatory concerns

While antitrust officials believe that the banks may have applied a more judgmental approach in dealing with the brokers, the banks maintain that it’s a precaution. The feeling within banking corridors is that brokers offer no guarantee of complying with AML laws.

Experts from Brazil’s agency reiterated that it is wrong to blanket all crypto brokers and platforms with the hamfisted application of old regulations.

The agency does state that it is paramount for every institution to avoid illicit activities. In fact,  Cade says it is advisable for banks to “take restrictive measures” whenever there sufficient grounds to suggest an account holder may commit crimes.

But it adds:

“However, it does not seem reasonable for banks to apply restrictive measures a priori on a straight-line basis to all crypto-currency companies, without examining the level of compliance and anti-fraud measures adopted by individual brokerage firms.”

But banks are unlikely to take a different stand, with many seen to be ready for contestations rather than expose themselves to possible sanctions from the Central Bank.

It is a conflict that is unlikely to end soon. If Cade ends up deciding that the case is an administrative proceeding, then the six banks risk facing some action. Potentially, the probe could result in the imposition of fines among other penalties.

Reacting to the probe, Banco do Brasil has said that it remains committed to offering its services within a framework of “competitive practices” that it believes are based on ethics.

Another bank, Itaú Unibanco, has maintained that it has confidence in its practices and that the investigation will find its conduct to be legitimate.

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