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Brazil Regulator Votes to Continue Probe Into Banks’ Rejection of Crypto Firms

Brazil’s biggest private banks are not out of the woods yet.

On Wednesday, Brazil’s antitrust watchdog, the Administrative Council for Economic Defense (CADE), voted to continue its investigation of banks who denied financial services to crypto brokers in alleged violation of Brazilian competition law. 

CADE’s nearly two-year-old inquiry into Itaú Unibanco, Banco do Brasil, Santander, Inter, Bradesco and Sicredi now returns to the General Superintendency for further review, as per the decision by CADE’s chief tribunal. Those six banks comprise the lion’s share of Brazil’s banking sector.

The ruling, made by a seven-member tribunal, reopens the possibility that these powerhouse banks – they held over 80% of deposit market share during the time in question – could face eventual sanctions and even be forced to provide financial services to crypto brokers.

Such an outcome appeared unlikely as recently as last week, after the General Superintendency, CADE’s investigative wing, tried to close the case on technical grounds. But on May 13, Counselor Lenisa Rodrigues Prado called upon CADE to reopen its investigation.

In Prado’s view, 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.

Fernando de Magalhães Furlan, a former CADE official who leads the Brazilian Cryptocurrency and Blockchain Association’s (ABCB) charge against the banks, said the ruling “is a victory to the Brazilian crypto sector. ABCB represents 39 crypto brokers, according to Furlan.


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 Furlan, who as CEO of ABCB first called for a CADE investigation in April 2018.

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. 


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 for the crypto payroll company Bitwage.

“For us crypto businesses, I know I can speak for our partners in Brazil on that too, we are confident in our [know-your-customer] procedures, making sure we are only enabling legit professionals, helping them to add efficiency to their payments and finances,” he said.

Furlan and ABCB appealed the decision. The appeal was denied. But on May 13, Prado said money laundering was not a good enough reason to lock out the crypto brokers in her call to continue the inquiry.

Crypto’s nascency was actually an argument for letting such businesses in, she wrote.

“In order to avoid the risk of pushing independent crypto asset brokers into a ‘limbo’ of the financial system (which could even increase the risks related to money laundering), CADE must exercise its duty to protect competition in this growing market,” she wrote.

Next steps

Itaú, the second-largest bank in Brazil and the only one to respond to CoinDesk’s questions before Wednesday’s ruling, said it “remains confident that its conduct will be considered legal and valid.”

“If the investigation is reopened, the bank will continue to collaborate with CADE in the necessary clarifications,” an Itaú spokesperson said at the time (the spokesperson could not immediately be reached for comment after the ruling).

Oliviera, the Brazilian exchange founder, thinks the sanctioning argument only failed previously because its proponent, ABCB, “was funded exclusively and controlled by” Atlas Quantum, an alleged crypto ponzi scheme.

(Furlan’s April 2018 letter to CADE highlights that Atlas, an ABCB member, was denied a bank account by Banco do Brasil).

“I do believe that relations between ABCB and Atlas were considered for CADE to have decided that there’s no competition conflict for banks to close bank accounts of crypto business,” Oliviera said. 

Furlan told CoinDesk that ABCB has 39 members but acknowledged that the organization “has not been very active” since its main contributor ran into regulatory trouble with Brazil’s SEC. 

UPDATE (May 20, 18:15 UTC): Brazil’s antitrust regulator voted Wednesday to continue its investigation of local banks for allegedly blocking crypto firms’ access to financial services.

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A Former Coinbase Lawyer Is About to Become Acting Head of US Bank Regulator

A former top lawyer at Coinbase is about to take the top job at a major U.S. bank regulator, at least temporarily.

Brian Brooks, the first deputy comptroller and chief operating officer in the Office of the Comptroller of the Currency (OCC), is poised to become acting comptroller as his boss, Joseph Otting, is planning an imminent departure.

Otting will be stepping down after reforming rules designed to prevent financial institutions from discriminating against low-income and minority individuals, Politico Pro reported Tuesday, and he intends to announce his departure after the new rules are finalized this week. The Wall Street Journal also reported Otting’s plans.

Brooks, as the First Deputy, will take on the role of Acting Comptroller of the Currency until U.S. President Donald Trump nominates a permanent candidate and the U.S. Senate confirms them. The OCC is the only entity that charters national banks in the U.S.

Neither outlet had a firm timeline for Otting’s departure.

Brooks took the role of First Deputy barely two months ago, but has already announced his support of a charter which would allow crypto – and other fintech firms – to be licensed through a national regime, rather than have these companies secure money services business licenses on a state-by-state basis.

Prior to joining the OCC, Brooks was chief legal officer at crypto exchange Coinbase. In recent years, he’s also held leadership and advisory roles at Fannie Mae, and notably was the vice chairman of OneWest Bank between 2011 and 2014. OneWest was founded and owned by Steven Mnuchin, now the U.S. Treasury Secretary who appointed Brooks to his OCC role.

Otting was also at OneWest, as president and CEO between 2010 and 2015.

A spokesperson for the OCC could not immediately be reached for comment.

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US Banking Regulator Suggests Federal Licensing Framework for Crypto Firms

A key bank regulator in the U.S. may be open to allowing crypto companies to be licensed as financial institutions on a national, rather than state-by-state, level.

Brian Brooks, chief operating officer of the U.S. Office of the Comptroller of the Currency (OCC), the nation’s national bank overseer, said Monday he believes crypto companies could fall under a federal licensing regime – if they provide what can be described as payment services.

Speaking at CoinDesk’s Consensus: Distributed virtual conference, the former Coinbase chief legal officer said many crypto companies are payments companies, and it therefore might make sense to treat these startups – and other fintech firms like Stripe – the same way as banks are treated federally.

“Crypto is one of those areas where we have to ask ourselves, does it make more sense to think of crypto projects as local projects or global projects. If they’re global, then the rational for a single national license makes more sense,” he said. “Increasingly, it looks a lot like crypto is banking for the 21st century.”

This would give these startups an alternative to the state-level money transmitter licenses when building operations.

He pointed to stablecoins, some tokens and remittances as examples of where crypto startups might look more like banking services.

The charter is different from the OCC’s fintech charter in that it doesn’t just apply to lending.

The fintech charter is based on the idea that banks took deposits, made loans and were involved in payments, but some institutions might provide only one or two of these services. These institutions can still be treated as banks under the OCC’s fintech charter.

“I come back to the idea of things that are inherently borderless, like crypto, probably makes sense as a licensed structure,” he said.

Too big to bank?

Brooks also addressed the issues some crypto startups have tapping banking services, saying any company that is compliant with applicable laws should be able to tap these services.

“As crypto matures, there are increasingly many companies that have perfectly robust risk management systems and do have an ability to comply with those laws, and they shouldn’t have trouble finding bank relationships,” he said. “Again, one of my messages in my new role is going to be to remind my colleagues at the OCC that banks not only have the ability, they have an obligation to serve all lawful businesses. They shouldn’t be discriminating because something’s a new technology.”

More provocatively, he suggested that crypto startups can potentially even replace the existing banking infrastructure, though he stopped short of saying that outright.

“There are technologies that exist that can decentralize and reduce the single points of failure that our economy is mostly built on,” he said. “If you think back to the lessons of the financial crisis, it’s that there are a small number of financial crisis, it’s that there are a small number of institutions in our society that are really so big and so connected with so many people’s lives that in the words of 2008, they were thought to be ‘too big to fail.'”

Decentralizing the risk could, if not outright replace this issue, at least help provide some solutions, he said. Banks would have to learn from crypto startups as they continue operations.

“I think that crypto is going to feed the banking system and change our view of what the bank charter is about,” he said.

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The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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