Cryptocurrencies, as a new global phenomenon, are accompanied by unclear legal regulation and significant financial implications. The absence of clear legislation renders this area vulnerable to judicial decisions.
Although courts — even from a global perspective e— have not yet developed extensive case law on cryptocurrencies, the number of disputes in this area is increasing. The subject matter of cryptocurrency litigation is diverse. However, disputes initiated by participants in the “crypto world” against banking entities form a relatively distinct category. These disputes typically revolve around the termination of current account agreements by banks or their refusal to open such accounts. This phenomenon is not unfamiliar in the Czech Republic, and several such instances have been reported abroad.
One notable case, which has garnered significant attention in Israel and on which the Israeli Supreme Court has issued a preliminary ruling, is the matter of Bits of Gold vs. Bank Leumi. Bits of Gold, a company engaged in cryptocurrency transactions (primarily bitcoin), opened a current account with Bank Leumi in 2013, expressly informing the bank that the account would be used in connection with the purchase and sale of bitcoin. After several years, the bank informed Bits of Gold that the account could no longer be used for any activities related to bitcoin trading and subsequently terminated the account agreement.
Bits of Gold sought judicial protection against this action by Bank Leumi. The lower courts dismissed the claim, accepting the bank’s argument that maintaining an account used for bitcoin trading could cause serious harm by compelling the bank to engage in an activity it reasonably feared might contravene banking regulations. However, the bank’s arguments faced greater scrutiny in the Supreme Court. The Supreme Court held that Bank Leumi’s decision to terminate the account agreement was predicated on the assumption that Bits of Gold’s activities inherently carried a risk of breaching banking regulations — a risk that had not materialised in the more than five years that the account had been active. The court also reminded the bank that alternative tools were available to address similar risks, including those used to prevent AML/CFT violations. It concluded that the bank’s concerns amounted to “nothing more than speculation at this stage” and ruled in favour of Bits of Gold.
Other jurisdictions, including the United States and Russia, are experiencing similar developments. In April, a Chilean antitrust court ordered two of Chile’s largest banks to reopen accounts held by Buda, one of the largest cryptocurrency exchanges in the country, following arbitration proceedings against Banco del Estado de Chile and Itau Corpbanca. According to available information, Buda is currently pursuing litigation to reopen accounts with eight other banks. Similarly, the Polish Bitcoin Association Association has called upon the local competition authority to investigate the practice of banks terminating account agreements. In India, the Supreme Court is expected to deliver a judgment this month on the constitutionality of the Reserve Bank of India’s directive prohibiting banks and payment service providers from engaging in cryptocurrency transactions.
We will keep continue to provide updates on the most interesting decisions in the area on our blog.
