Business 11 February 2019

Dennis Wafula

Brazil court rules in favor of a cryptocurrency exchange

A court in Brazil has ruled in favor of Mercado Bitcoin, a local altcoin trading platform over the illegal closure of one of its checking accounts.

According to local reports, Judge Regina Lucia Passos, who presided over the case in a court in Rio de Janeiro, rejected an appeal submitted by Banco Sicoob. The bank wanted the court to reverse an earlier decision by a local district court that had allowed the exchange to keep its crypto-related accounts with the bank.

Judge Lucia, while giving her judgment explained that the bank needed to provide their clients with a “justifiable reason” before closing their accounts. She stated that even though crypto trading is perceived as risky activity, and many authorities in the country have warned against it, the Central Bank of Brazil has not prohibited cryptocurrency trading. Passos cited a few legal references that explicitly stated that banks should express their exact motives and reasons for their customers before taking any drastic steps.

The judge further added that the bank incurred no losses from maintaining the crypto account. She said that actions taken by the bank to close the crypto account unilaterally and only stating “commercial disinterest” as the reason for the closure, was illegal and in violation of resolution No. 2,025/93 of Banco Central do Brasil.

Reportedly, the decision by the court might not be “final.”

Last year, the exchange lost a lawsuit against the closure of its accounts by another banking institution, Banco Itau. During the hiring, the Brazilian High Court ruled that banks have the right to close accounts related to cryptocurrencies without providing any reason. The judge added that it was the duty of crypto exchanges to prove whether the bank had breached any constitutional laws through their action. The judge further explained that if the exchange found such breaches, they should take the matter to the Supreme Court.

The courts in Brazil seem to be in support of cryptocurrency. Last year, Bitcoin Max got a similar ruling that saw two financial institutions ordered to restore accounts belonging to the exchange. In this case, the judge ruled that the financial institutions acted illegally in closing the accounts and would face significant fines if they failed to adhere to the orders.

Note: Tokens on the Bitcoin Core (SegWit) chain are referenced as BTC coins; tokens on the Bitcoin Cash ABC chain are referenced as BCH, BCH-ABC or BAB coins.

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