Chile's Court for the Defense of Free Competition (TDLC) has issued a landmark ruling, ordering Banco Itaú and BancoEstado to maintain checking accounts for the Latin American cryptocurrency exchange Buda. The accounts were closed in 2018 amid an investigation into a Ponzi scheme involving a bogus company called Terra Finance, which was unrelated to Buda.
Background: Banks Shut Accounts Over Ponzi Scheme Concerns
According to Chilean financial newspaper Diario Financiero, the TDLC rejected the banks' petitions to keep the accounts closed. The case originated from a lawsuit filed by four victims of the Terra Finance fraud, who lost a total of 100 million Chilean pesos (approximately $200,000). The plaintiffs claimed they were users of Buda's platform. Banco Itaú defended its decision by asserting that Buda indirectly allowed the use of its systems by other high-risk cryptocurrency exchanges, including Terra Finance, and failed to take preventive measures.
The bank stated: “Buda is indirectly allowing the use of Itaú’s systems by other cryptocurrency exchanges of recognized risk, without being able to do anything about it.” However, the court found these allegations insufficient, ruling that “the new information presented does not undermine the serious presumption of the right that is claimed or of the facts denounced in the lawsuit.”
Court Ruling: Banks Fail to Provide Strong Evidence
The TDLC's decision allows Buda to continue operating its checking accounts with the two major banks. Buda's Chief Legal Officer, Samuel Cañas, told local media: “The bank has not been able to present sufficient information to dismiss the serious presumption of acts that threaten free competition that the Court determined to grant the precautionary measure in favor of Buda.com.”
Despite the favorable ruling, Buda's CEO Guillermo Torrealba noted that the legal battle is far from over. “Lawyers tell me there is still one year left,” he said. However, he emphasized that the exchange is “on the right path,” as four out of five judges voted in favor of Buda, compared to only three in the previous hearing.
Industry Impact and Legal Significance
This case is seen as a significant victory for the cryptocurrency industry within the traditional financial system. Chile, one of the more open markets for crypto in Latin America, may set a precedent for other exchanges facing similar banking restrictions. Buda operates in Chile, Peru, Argentina, and Colombia, and this ruling helps solidify its position in the region.
Nevertheless, Torrealba warned that tensions between banks and crypto companies will not disappear quickly. “We are coexisting with the system, but we need more time for regulators to understand the legitimacy and value of cryptocurrencies,” he said, urging Chilean financial authorities to create clearer regulations to safeguard basic banking services for crypto firms.