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Bank rejects Your Crypto Business? Go to Court

Priyeshu Garg
Last updated: | 2 min read

With cryptocurrencies ironing out issues and gaining credibility, several banks have opted to take a hard line on them, thereby frustrating the domestic efforts of virtual currencies to gain traction in the financial industry and greater world.

With renewed regulatory focus all over the world as lawmakers seek to both educate themselves on cryptocurrencies while enacting regulatory legislation, court battles are becoming the norm.

According to media reports, in a dramatic stance, Israeli banks have refused to open an account for a new cryptocurrency exchange Bitflash LTD.

The company is suing Leumi Bank after all the banks in the area refused to open an account to enable it to start trading trading.

While a bank is not obliged to service any particular entity, records show that they have been obstructive in enabling a local company to open up for trading. Hoping to succeed in its action on the back of the findings that banking is thwarting the local economy, Bitflash attorney Alon Huberman pointed to his experience of the difficulties faced with banks.

With transcripts as evidence, even once the company had taken away all of the banks’ concerns completely, they still refused to do business with Bitflash. In addition, some of the banks that declined Bitflash have companies with a similar focus which hold accounts with them, which suggests there is at least the open possibility of cartel-style dealings taking place to prevent certain companies from trading in the region.

Meanwhile, in Thailand, Reuters reported on February 12, 2018 that the Thai Central Bank has formally requested that all of the country’s banks avoid backing cryptocurrencies in every way until policy on the issue can be formulated. Although labeled a “request,” polite missives from Thai political and formal business sectors are typically more an edict than anything else.

Moreover, in India, Koinex has suffered embarrassing issues related to users’ Indian rupee withdrawals. Stymied by a conflict between its payment service provider and its bank, Koinex has been diplomatically trying to resolve the issue, in what appears to be another case of banks pulling the rug out from underneath virtual currency business. Issues around legitimacy and taxation have been in the news since mid-2017, when India’s courts felt compelled to look at the credibility of virtual currencies.

Dealing with “opposition”

Also, while not targeting a specific company, several banks in the US and the UK have banned crypto purchases with credit cards.

Meanwhile, in Poland, the central bank has derided cryptocurrencies on YouTube. According to media reports, the bank has spent almost USD 30,000 funding a “marketing campaign” aimed at warding people off Bitcoin and others.

It appears that banks view cryptocurrencies as being in conflict with their operating model, and so are engaging in various campaigns to slow or stop the growth of crypto-businesses. While banks want a piece of the action, they also fear doing business with the opposition. Employing tactics of obfuscation and worse, there seems no limit to what banks will do to maintain their hegemony at the expense of virtual currencies.