Cryptocurrencies are undoubtedly the future of transactions and Bitcoin is leading the way. With increasing number of Bitcoin and cryptocurrency transactions, the commercial banks are fearing a near replacement. Added to their concerns, they are unsure about how the Bitcoin regulations would shape up in different geographies and are hesitant in aiding their development. Bitfinex that has recently redeemed the hack victims completely has been a victim of one such incident. This time the involved bank was Wells Fargo and the exchange moved on to a lawsuit to avoid any impending repercussions. Let’s dive deep into what exactly happened and how Bitfinex is proposing to tackle the issue:
Lawsuit over embargoed wire transfer:
Bitfinex is taking Wells Fargo to the court for having reversed US Dollar cash deposits designated to their customer accounts coming from the exchange. This is infact a very important law suit for the Bitcoin world as the legality of shutting down bank accounts merely for being related to the use of Bitcoin or cryptocurrency trading has been a grey area. The opening statement makes it clear enough for the court what the issue is:
“Wells Fargo has suspended U. S. dollar wire transfer operations needed to remit to plaintffs’ customers U. S. dollars that the customers deposited with plaintiffs to purchase digital currency, causing imminent and irreparable harm to plaintiffs.”
The legal basis for the lawsuit lies in the fact that Bitfinex works with Taiwanese banks, including a bank called ‘Taishin’. Tashin is responsible for relaying the transfers to US customers using Wells Fargo, among others. Wells Fargo recently sent a letter to the Taiwanese bank informing them that they would no longer be accepting the deposits from these accounts until “further due diligence” was obtained.
Withdrawal of Lawsuit:
Surprisingly, a week after filing, Bitfinex has withdrawn its lawsuit against Wells Fargo for suspending its U.S. dollar transfers. Many believed that Bitfinex had a chance against Wells Fargo, which acted as the company’s correspondent bank. The lawsuit became the cynosure of the cryptocurrency world as that would let everyone know about Bitcoin’s standing. While no statement was issued by Bitfinex, many believe that Bitfinex had no legal standing and banks are allowed to selectively block transactions at their own discretion. Hence Bitfinex would have eventually lost and it was an act to make a statement.
Bitfinex stops accepting Fiat deposits:
After the entire showdown about the lawsuit against Wells Fargo, Bitfinex has announced yesterday that they would stop accepting fiat deposits. The exchange has sighted that the refusal on the part of the banks is one of the major reasons. They said:
“Beginning April 18, 2017, all incoming wires to Bitfinex will be blocked and refused by our Taiwan banks. This applies to all fiat currencies at the present time. Accordingly, we ask customers to avoid sending incoming wires to us until further notice, effective immediately.”
The exchange said this would be an expected delay till they find alternatives to process customer funds and put a framework in place.