Brazil to Investigate Banks Denying Service for Crypto Companies

Brazilian banks that have denied service to cryptocurrency companies are now being scrutinized by local authorities, according to a recent report from Folha de São Paulo.

On May 20, the Administrative Council for Economic Defense, or CADE, voted to reopen the case against local lenders who reportedly refuse to work with cryptocurrency firms. The lawsuit was originally filed in 2018 by Associação Brasileira de Criptoativos e Blockchain, or ABCB, a Sao Paulo-based blockchain non-profit, after Banco do Brasil closed the account of crypto exchange Atlas citing an “administrative decision.”

The bill mentions a number of other major Brazilian banks, namely Santander, Itau Unibanco, Sicredi and Banco Inter, also accusing them of illicit refusal of service.

In December 2019, the case was shelved after the defended banks claimed that there were no central bank-issued regulations that compelled them to provide service, while the cryptocurrency market was unregulated and hence prone to money laundering activities.

Now, CADE has unanimously chosen to reopen the probe, arguing that “no reasonable evidence” was presented to justify account closures and service denial. The watchdog’s counselor Lenisa Rodrigues Prado is quoted saying:

“In order to avoid the risk of pushing independent crypto brokers into a ‘limbo’ of the financial system (which might increase money laundering risks), CADE should exercise its duty to protect competition in this rising market.”

Other local agencies, like Securities and Exchange Commission, or CVM, Financial Activities Control Council, or COAF, and the Federal Revenue Department, or RFB, are expected to partake in the renewed investigation.

According to Folha de São Paulo, Banco do Brasil has already stated that it provided CADE with all the requested information and that it will fully cooperate with the authorities. Other banks reportedly declined to comment.

Cryptocurrencies in Brazil remain largely unregulated. However, in February 2020, Cointelegraph Brasil reported that two major cryptocurrency exchanges shut down following threats of heavy fines due to renewed tax norms.

Apparently, all crypto trading platforms in the country fall under the purview of Normative Instruction No. 1888 issued by the RFB, which obliges them to report all transactions or face fines ranging from 500 BRD to 1500 BRD ($120 to $360).

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