There is hardly ever a boring day in the world of cryptocurrency, and today is no different. It appears as if the Wells Fargo Bank has caused some controversy. This bank no longer allows virtual currency platform customers withdraw money. So far, close to US$180m in funds is locked up in Wells Fargo accounts, with no clear path to a resolution in sight.
It is not the first time the banking system and cryptocurrency platforms do not see eye to eye. Several bitcoin users have had bank accounts closed whenever they bought or sold bitcoin, which is quite a troublesome development. It appears a similar issue is now extending to iFinex Inc – parent company of the Bitfinex exchange – and Tether Ltd.
To be more specific, both companies are working together with Wells Fargo to process customer deposits and withdrawals. For some unknown reason, the financial institution is no longer allowing customers withdraw the money controlled by iFinex and Tether. That is quite a big problem, especially when considering the bank has effectually frozen US$180m in consumer funds out of the blue.
It appears Wells Fargo has made this decision without informing the affected parties, which does not sit well with other enterprises. The bank suspended US Dollar wire transfer operations from a group of Taiwanese banks, although it remains unclear what the reasoning behind this move is. For iFinex and Tether customers, they are unable to exchange virtual currency to US Dollar funds, as none of the wire transfers are being processed.
Tether’s currency is linked to the US Dollar at a rate of US$1 per USDT. The company has also launched an EUR trading pair a while ago, although these transfers are seemingly not affected right now. Exchanging the USDT tokens for US Dollars will remain unavailable until the problems have been resolved. As of right now, close to US$50m worth of customer funds is now actively controlled by Wells Fargo without having any way to get the money out in a convenient manner.
For iFinex, the problems are a lot larger. Close to US$130m in customer funds has been frozen by Wells Fargo. Considering the company only recently reimbursed all users after the Bitfinex exchange was hacked in 2016, it remains to be seen how they will deal with such a major financial setback. Wells Fargo has yet to provide an official explanation for their course of action, or at least offer a solution so that customers can access their funds.
It is evident the banking giant is targeting both iFinex and Tether specifically. A lot of banks are not too keen on service providers dealing with virtual currencies, especially not when they hold onto customer funds. That is the danger when dealing with centralized services relying on traditional financial institutions. It is possible both companies will switch to a new banking partner, although that has not been confirmed as of yet.
According to a bitfinex representative, the company is taking the bank to court in order to establish a precedence where banks can’t just willingly shut down Bitcoin businesses.
“The decision to initiate legal action is because we cannot allow precedence in this industry where clearing houses can disrupt businesses that are by all metrics complying with the rules in place. If we allow them to simply flip a switch and disrupt business, then there becomes a precedence in the Bitcoin industry beyond just Bitfinex, so we believe it is the appropriate time to take action to prevent precedence.” – bfx_brandon
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