Israel Supreme Court Temporarily Stops Account Closure for a Cryptobased Business. Will this set a Precedent or is it a Mere Setback on Bank’s Tensive Relationships with Cryptobased Businesses?

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Israel Supreme court issued precedent setting injunction that some observers expect to impact on the current jittery relationship between conventional banks and crypto-based businesses.  The injunction which was issued on 26th February, 2018, stopped Bank Leumi from halting the accounts of a crypto accepting company merely on the basis of that its revenue is derived from trading in cryptocurrencies.

Leumi Bank took the decision to block payments to crypt-exchanges from December last year basing its decision on anti gambling laws and directives from the Bank of Israel. The Supreme Court Judge was of the view that assumption of possible violation of law was merely speculative and thus cannot form basis of denial of service.

The court stated, inter alia, that “The damages that may be caused to the Bank as long as the request is accepted are considered to be speculative at this time. The Bank’s decision is based on the assumption that the Company’s activity does indeed entail risks that arise in violation of the law, But for the past five years that the account has been operating, these fears have not materialized – as the District Court has determined, according to which the company acted transparently and did not violate any provision of law.”

The Judge also added that the injunction was “not intended to harm the bank’s rights to analyze with specificity every transaction that takes place with the bank account or to take any actions that are related to minimizing risks, which become transparent through the activities of the company.”

Mr. Zioni of Zioni Pillersdorf Phillip, the lawyer for the crypto company, welcomed the Supreme Court decision as a ‘courageous precedent’ for the emerging crypto trading industry.

The celebration of injunction notwithstanding, of interest to the industry will be how the court’s reasoning will inform other courts around the world in determining similar litigation, if any,  by crypto-based businesses and impact of such decisions on the interactions of crypto-based businesses with conventional banks.

 

Ahmed Ali