Despite receiving regulatory approval to operate in the country, at least three exchanges have had their accounts closed by Portuguese banks. What’s the reason? Banks are concerned about potential money laundering.
In order to prevent the possibility of illegal behavior through these exchanges, Portuguese commercial banks are closing the accounts of cryptocurrency exchanges.
Furthermore, despite the fact that the exchanges are authorized to conduct business in Portugal, the banks are essentially free to decide how to terminate those accounts.
The accounts of the Portuguese cryptocurrency exchange CriptoLoja were stopped last week by Banco Comercial Português,
the largest bank in Portugal, and Banco Santander (SAN). No longer permitted is the exchange to own any capital in such institutions.
This conversation is not unique. Portuguese banks also froze the accounts of the cryptocurrency exchanges Mind the Coin and Luso Digital Assets earlier this year.
Over the past year, Portuguese institutions have begun shutting accounts with cryptocurrency exchanges due to worries that these exchanges facilitate money laundering and other illegal activity.
The corporate side finds it to be a nightmare. A straightforward payment is more difficult than it would be if we had a bank account in Portugal, according to Pedro Borges, the CEO of CriptoLoja. “These types of bothersome actions that the banks are taking are not beneficial for the nation.”
In a recent interview, Ricardo Felipe, the chief product officer of Luso, claimed that the national bank Caixa Geral de Depósitos had given him no explanation as to why the exchange was no longer permitted to have accounts there as of last year. Both Banco Santander and Banco Comercial Português reported closing accounts this year due to suspected fraudulent consumers. When questioned about these specific accusations, Borges remained silent.
As Felipe explained, “We already understood that this was only a question of time and that we would need to pay attention and concentrate our efforts on our banking connections.”
According to Felipe, Portugal’s regulatory framework permits banks to formally terminate customer accounts with cryptocurrency exchanges without seeking permission from the watchdog.
Felipe stated, “Even though we do have a regulation or license from them [on anti-money laundering], it’s not something that establishes that kind of activity with the banks.
In a recent interview, Nuno Correia, the founder and chief strategy officer of the Portuguese cryptocurrency exchange Utrust, stated
that the company hasn’t been hurt by banks cancelling their accounts. He does note the differences between the banking industry and the regulators, though.
“The Central Bank of Portugal has extensive knowledge, conducts thorough due diligence on companies, and embraces innovation at the same time. The banking industry as a whole is not affected in the same way, according to Correia.
Portuguese judicial system
The central bank of Portugal, Banco de Portugal, oversees Portuguese banks. Local attorney Joo G. Gil Figueira claims that the central bank issues licenses to numerous cryptocurrency businesses operating in the nation. Commercially independent banks, on the other hand, are free to decide whether or not to let these businesses to hold accounts in their institutions and to close those accounts at any time.
Figueira recently stated that banks prefer to engage with businesses that may not raise worries over money laundering or tax evasion, two crimes thought to be frequently associated with lenders and brokers of digital assets.
“It appears that banks do not trust their own regulator’s decision to issue such operating authorizations.
In a recent interview, Figueira was quoted as saying: “So it’s a combination of banks being sluggish to move, unprepared, frightened of money laundering, and preferring other low-hanging fruits in other areas.
Despite the fact that Luso is unable to open an account with the Banco de Portugal, Felipe expressed optimism that the future Markets in Crypto Assets bill, which is expected to take effect in 2024, will clarify how commercial banks and regulators should interact.
The Markets in Crypto Assets bill (MiCA) will give the European Union a framework for regulating digital assets, from stablecoins to initial coin offerings. Additionally, it will establish a uniform licensing system that will facilitate business establishment throughout all of the EU’s member states.
“Thanks to MiCA, we’ll become financial institutions. Even if the bank wishes to hide them, we will have the security of being awarded Portuguese partner bank accounts, said Felipe.
Figueira doesn’t believe MiCA will take any action to stop banks from canceling accounts in Portugal, though. Instead, it will serve as a “passport” allowing cryptocurrency businesses to operate across European countries.
MiCA will have an impact on consumer protection more so than [anti-money laundering/know your customer regulations], and more specifically on the creation, issuance, and investment in such assets. It won’t really have a direct bearing on the banking-related difficulties and components that we’re talking about, according to Figueira.