Brazil to Rule on Probe Into Banks’ Rejection of Crypto Firms

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Please consider using a different web browser for better experience. Please enable JavaScript in your browser for a better site experience. Brazil to Rule on Probe Into Banks’ Rejection of Crypto Firms May 20, 2020 at 14:51 UTC Updated May 20, 2020 at 15:15 UTC “No company, no enterprise can survive in capitalism without access to the financial system,” said lawyer Fernando de Magalhães Furlan. (Credit: Tupungato / Shutterstock) Danny Nelson Brazil to Rule on Probe Into Banks’ Rejection of Crypto Firms Brazil’s national competition regulator is poised to rule on whether some of the largest banks in the country wrongly locked the nation’s nascent crypto scene out of financial services. Lawyers involved in the probe told CoinDesk that a seven-member tribunal with the Administrative Council for Economic Defense (CADE) could decide as soon as Wednesday whether or not to continue a disciplinary inquiry against the six commercial banks: Itaú, Banco do Brasil, Santander, Inter, Bradesco and Sicredi. (The probe did not appear on the official docket for CADE's tribunal on Wednesday.) The investigation into their allegedly anti-competitive refusal to serve local crypto brokers had been fizzling in late 2019 when its instigator, CADE, moved to drop the probe. But after an appeal, a refusal and a reversal of course, CADE’s top members will weigh in on the investigation's fate. Fernando de Magalhães Furlan, who leads the Brazilian Cryptocurrency and Blockchain Association (ABCB) and issued the first call for a CADE investigation in April 2018, outlined two possibilities for the Tribunal when it meets. They will either continue the investigation with an eye toward sanctioning the banks, a proposal outlined by CADE Counselor Lenisa Rodrigues Prado in her May 13 order . Or they will uphold a previous decision by the CADE General Superintendent to terminate the proceedings. Continuing the investigation would give credence to Prado’s view that these banks failed to give reasonable justification for shutting out crypto brokers. She found “significant evidence” that they had violated Brazilian laws protecting market competition and called upon CADE to initiate a sanctions inquiry. In doing so, Prado injected hope into the Brazilian crypto business’ multi-year struggle to access local financial infrastructure, and life into the administrative proceeding that had previously looked to be moving in favor of the banks, said three executives at crypto companies, including Furlan. Shutdowns Crypto brokers and banks had been at loggerheads before CADE launched its probe in September 2018. Banks, weary of the legal grey zone that cryptocurrency trading inhabits in Brazil (and allegedly fearful cryptocurrency’s success would eat into their own) had begun shutting down crypto brokerage accounts. Without brokerage accounts, exchanges such as Nox Bitcoin could not easily provide cash on and off ramps to their customers. Founder João Paulo Oliveira said Banco Bradesco closed his brokerage account. Banco Bradesco declined to comment on CADE proceedings. It was a pattern rippling across Brazil’s crypto landscape, said Fernando de Magalhães Furlan, who as CEO of the Brazilian Cryptocurrency and Blockchain Association (ABCB) first called for a CADE investigation in April 2018. A former CADE official, Furlan said the banks would swoop in and close accounts “without any justification whatsoever.” He said their collective cold shoulder was a broadside to Brazil’s growing crypto industry. “No company, no enterprise can survive in capitalism without access to the financial system,” Furlan said. Competition Itaú Unibanco denied allegations it acted anti-competitively. Itaú “has always guided its commercial practices based on the defense of free initiative and competition, as well as the understanding that competition is positive not only for the financial system, but for the whole country,” a spokesperson told CoinDesk. There does not appear to be any evidence the banks coordinated their decisions, Furlan said. A previous CADE official said none of them wielded individual market power, according to Furlan. These are usually two hallmarks of anti-competitive case law. Indeed, Furlan said, a different CADE official’s December 2019 attempt to drop the case partly rested on the banks’ individual inability to control the market. Furlan said it was a distinction without a difference. Four of the banks involved in the inquiry rank among the five-largest in all of Brazil. CADE said that in 2017, a year before its own investigation began, the six banks together held over 80% of Brazilian deposits. The other argument Furlan said the first CADE ruling drew from was the banks’ stated fear that crypto brokers would expose them to money laundering. Members of the crypto business landscape reject that claim. “We do a better job in checking the legitimacy of the money we touch than banks and government agencies,” said Fabiano Dias, vice president of LATAM operations...