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Can Banks Choke Exchanges? The Chilean And Finnish Cases

It is an exciting time in the fintech and financial market. The emergence of cryptocurrencies has stirred up things for banks and financial institutions, and some have understood that the future is here and that they have to adapt or face obsolescence. But for others, it’s a fight for survival. And they are not playing fair. It looks like we are experiencing a clash between traditional industries and new, more innovative technologies, and that conflict has never resulted well for the former.
The Chilean crypto society is facing a struggle of this kind. We reported almost a month ago that two national exchanges in Chile got their banks account closed without any notice or explanation. But now, a third exchange joins the ranks, making this a trend now in that country. Orionx, the exchange which accounts has been also closed, join the ranks of another two exchanges also affected by the unilateral measure: BUDA and Crypto MKT, according to Bloomberg.
This is not the first time that an incident of this kind has happened. Prassos, the biggest exchange in Finland has also faced these kinds of attacks before. Last month, four of its five bank accounts were closed, hampering its trading in an important percentage. Something that is fatal for an exchange that trades fiduciary money for cryptos. And not only that; exchanges are also businesses that have payrolls and operative expenses that must be paid in fiduciary money. So, these measures affect also the operativity of the exchanges.
The banks argue that the exchanges are high-risk enterprises not regulated by the state (at least in Chile and in Finland), and that these kinds of business pose a legal risk for them, in the case of lending their services directly or indirectly to money launderers and terrorist funders. This is troubling because a non-declared ban is being declared under an entire industry.
And the worst affected party are users. Without exchanges, users have to trade by themselves, risking their money and their own personal security. So, answering the initial title: Yes, they can choke exchanges, at least in some countries. But the exchanges are fighting back: they have introduced appeals in Chilean courts to roll back these measures. The only thing that can prevent these abuses is a clear regulatory framework. But, until that happens with crypto massification and adoption, we will keep seeing things like these happen.

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