Inside Chilean Power Battle: Crypto Exchanges vs. State Banks

The new phase in the legal battle between the banks and several crypto exchanges - including Buda.com and CryptoMarket, which had appealed against the denial of services - may look somewhat sinister from the outside.

Exchanges vs. banks - a brief outline of the confrontationIn March, two crypto exchanges - Buda and CryptoMKT - came out with a joint statement, claiming that some banks in Chile had closed their accounts.

Both crypto businesses then urged the Chilean Association of Banks, which coordinates all the private and foreign financial institutions in the country, to intervene - or at least clear up its stance on cryptocurrencies.

A response was given within a few days of the statement: The president of ABIF, Segismundo Schulin-Zeuthen, told Chilean business outlet Diario Financiero that the banks were free to moderate relations with their clients.

Chile's central bank reaffirmed that intention in May. Mario Marcel, the president of the institution, proposed incorporating the crypto regulation in order "To allow having a registry of participants in these activities and thus have information to monitor the associated risks." Marcel also stated that the industry needed more transparency and consumer protection - as cryptocurrencies could possibly be involved in illicit activities, such as money laundering and the financing of terrorists.

The top court stated that the cryptocurrencies "Have no physical manifestation and no intrinsic value." The document also proclaimed that they are controlled neither by a government nor by a corporation, citing the characteristics of crypto as reasons for letting banks refuse services to the exchange.

No pasaran: How Chilean crypto exchanges treat the highest court's decisionDespite the apparent harshness of the Supreme Court's decision, Chilean crypto exchanges believe it will have no bearing on the case.

"Orionx wants to clarify that this ruling does not imply the closure of the company's current bank accounts. [D]ue to the fact there is a current precautionary measure issued by TDLC, which prevents banks from closing the mentioned accounts."

Feuerhake further added that the Chilean courts are not evaluating the ban on crypto exchanges, but rather seek ways to "Condemn banks for abusive behavior" toward them.

The legal framework for crypto, if introduced, could side with crypto exchanges or stand with the banks.