On June 2017, Bits of Gold Ltd., which engages in cryptocurrency trading and manages its account at Bank Leumi, filed a motion with the District Court to order the bank to stop blocking activity relating to virtual currency trading in the company’s account.

The District Court rejected the company’s motion, thereby allowing Bank Leumi to exercise discretion and deny service to the company (and to other digital currency companies), despite its noting that the company had not broken any provision of law. To view our client update about the District Court ruling, click here.

As a result of the District Court ruling, Bits of Gold filed a motion with the Supreme Court for a preliminary injunction against the bank, prohibiting it from blocking activity in the account and, concurrently, filed an appeal of the District Court ruling with the Supreme Court.

On February 25, 2018, the Supreme Court ruled that the reasonability of the bank’s decision to refuse to allow virtual currency trading is an issue that has not yet been clarified or decided by the Supreme Court, and this issue encompasses not only a decision about the nature of the risk posed by virtual currency trading, but also legal questions with regard to the appropriate balance between the scope of a bank’s obligation to provide service and its responsibility to prevent illegal activities, such as money laundering and the financing of terrorist activities.

In its ruling, the Supreme Court ruled that the damages that are liable to be caused to the bank if the company continues operating through its bank account are mere speculations at this point and, as evidence of this uncertainty, the Court noted that no damage had been caused to the bank during the period of more than five years that the account has been active, adding that the company’s operations do not violate any law. The Supreme Court further noted that, since the bank possesses tools to prevent specific transactions that it suspects are illegal, there does not appear to be any substantive risk of the bank being caused damage at this time.

Although the Supreme Court did not deliberate the material question, which is – is a bank allowed to deny banking services to cryptocurrency traders, the court ruled in favor of Bits of Gold’s motion and issued a preliminary injunction that prohibits the bank from restricting activities relating to bitcoin trading in the company’s account, and this, without prejudicing the bank’s right to individually examine any operation being transacted in the account or its right to take steps to mitigate those risks that, in its opinion, the company’s activities are posing to the bank.

Although this Supreme Court ruling did not deliberate the material question about digital currency transactions in bank accounts, at issue is a precedent for other cryptocurrency companies that are struggling to obtain banking services, and should spur the judicial discussion of trading and transactions with digital currencies.