The Tel Aviv District Court has ruled that a bank’s policy to prohibit opening accounts for customers engaged in providing services relating to cryptocurrencies, is unreasonable. The decision was delivered in a lawsuit brought by a company that engages in Bitcoin mining against a bank branch that had closed the company’s account. The question raised before the court was whether the bank’s decision to close the account and refuse provide services because the source of its funds was from Bitcoins, met the reasonableness standard in section 2 (a) of Banking (Service to Customer) Law 5741-1981.
The bank argued that money that originates from cryptocurrency cannot be brought into traditional financial systems since banks do not allow the holding of cryptocurrencies and due to the risks associated with cryptocurrency in terms of money laundering and terror financing.
The court held that the bank's sweeping policy is unreasonable, since the policy does not distinguish between the different types and the volume of transactions in cryptocurrency and between the different types of customers in this field. The court explained that the nature of every transaction in cryptocurrency is different from another, and accordingly each requires a different approach by the bank.
In the current case, the court ruled that the bank’s refusal to provide services related to the funds deposited in the account is reasonable, given that source of the account’s funds gives rise to risks associated with money laundering. However, the bank’s decision to close the company’s account was unreasonable and void, since the company’s activity alone does not create risks associated with money laundering or terror financing.
This article was published in the Internet, Cyber and Copyright Group’s February 2019 Newsletter.