Canadian Bank Cuts Cointrader Accounts Amid Hostile Government Rhetoric

Bank of Montreal, the fourth-largest bank in Canada, has closed all Cointrader customer and corporate accounts, the Vancouver-based exchange revealed via blog post on 17th February.

Most notably, Cointrader suggested that the decision is part of a broader move by Bank of Montreal to sever ties with all of the virtual currency businesses it serves.

Cointrader CTO and co-founder Paul Szczesny said such a move would have a larger impact on the country’s burgeoning bitcoin ecosystem, and blamed recent warnings from the Canadian government for the bank’s decision.

Said Szczesny:

“It’s a drastic change in tone. Before this, there was a very hands-off approach in Canada. I do think that Canadian businesses should take pause.”

Cointrader maintained that the decision came despite its efforts to ensure its legal standing through strong AML and KYC compliance, and suggested it is prepared to move operations overseas should the government follow through on some of its more aggressive statements.

The news comes just one day after Cointrader announced it would power new ATMs to be installed in London and Singapore.

A relationship sours

Cointrader was particularly surprised by the news, given its near year-long relationship with Bank of Montreal.

Szczesny said that not only had the relationship been positive, but that the bank had been using Cointrader as a template for how it could work with other bitcoin businesses.

Speaking about the partnership, Szczesny said:

“We’d developed quite a strong relationship. We’d had the brand manager come down to our physical location to see what we’re doing.”

Szczesny further suggested that he believes the timing of the move, which followed unfavorable comments from Canada’s finance minister, indicates the country’s financial institutions will become more cautious in their dealings with bitcoin businesses given the recent hostile rhetoric.

Assessing the impact

Despite Cointrader’s sweeping warnings for Canadian bitcoin businesses, other members of Canada’s bitcoin ecosystem remained unconcerned about the viability of their banking relationships.

Mike Curry, CEO of the Toronto-based exchange Vault of Satoshi, suggested that the decision was likely an isolated incident.

“I think when it comes to banks, they deal on a one-on-one basis,” he said.

Further, Curry stated that Cointrader was unlikely to receive any formal reasoning from Bank of Montreal as to why its decision was made. He also moved to downplay the idea that Canada is becoming increasingly hostile to bitcoin businesses, citing his own firm’s relatively new relationship with Equifax.

“We’ve been shut down by banks before and we’ve never known why. There was always a hint of cryptocurrency, but I think it’s blown out of proportion.”

Similarly, virtual currency exchange Virtex suggested that its service has not been adversely affected by statements from the government.

VirtEx continues to have good relations with its financial partners. VirtEx is not experiencing any issues w/ respect to service disruption.

— CaVirtex (@cavirtex) February 18, 2014

Next steps

Going forward, Cointrader said it has one month to find a replacement bank. Szczesny indicated it is exploring local options, and that it is talking to large credit unions and one private bank.

As for the exchange’s day-to-day operations, Cointrader moved to assure its online trading platform would not be affected.

“We’ve already been expanding overseas. We plan on having bank accounts in other jurisdictions. The only real question right now is a convenient funding option in Canada,” Szczesny said.

Still, Cointrader indicated that Canada’s worsening bitcoin regulatory climate, as well as its decision to introduce a state-backed virtual currency, is forcing it to consider relocating its headquarters abroad.

Said the company:

“If Canada continues it’s negative stance, and chooses not to help this thriving economy grow in accordance with the law, then we will be forced to relocate to more forward-thinking economies which are able to encourage innovation while also effectively deterring criminal behaviour.”

Bank of Montreal did not respond to requests for further comment on its decision.