A Canadian bank has allegedly frozen $28 million in customer funds belonging to Canada’s largest cryptocurrency exchange. The Vancouver-based exchange desk – QuadrigaCX – claims that the Canadian Imperial Bank of Commerce (CIBC) locked the money and froze accounts belonging to its payment partner, Custodian, and its own, Jose Reyes. Was this arbitrary? There are reports that CIBC filed a request to take possession of the $28 million, as it was unable to determine who exactly it belonged to. Did it belong to Quadriga, Custodian or the 388 users who deposited funds into the account? Quadriga claims to have already credited the accounts with something called Quadriga Bucks, but it claims to be the rightful owner of a majority of the money.
CIBC wasn’t convinced and requested an “interpleader order”, which would then see the $28 million handed over to the justice system who would then decide who owns it. Pretty cutthroat, right? Quadriga’s CEO Gerald Cotten says Quadriga is being unfairly targeted just because they operate a cryptocurrency business. Which might be the case, but Cotten is going to have to dig pretty deep to be able to prove that.
The big question I have and have asked before is whether or not financial institutions should be more liberal when it comes to cryptocurrency? Cryptocurrency isn’t exactly new. In fact, Bitcoin has been around for almost ten years, so what’s holding financial institutions back? I think it has to do with the fact that it’s still so unknown. Is there anything shady going on with the trading and mining of cryptocurrency? How is it such a valuable asset when there is literally nothing there? I mean, you’re mining something on the internet, that technically doesn’t exist.
Let’s get back to this example for a moment though. CIBC froze the funds because it couldn’t figure out who the money actually belonged to. In Canada, banking regulations are quite strict when it comes to who is depositing money into bank accounts. If the money can’t be traced to a credible funding source, for a specified amount of time, the bank’s red flags go up. Which, to me, says this is a bigger issue with the Canadian banking system, rather than just cryptocurrency, as Quadriga is suggesting.
Quadriga is now claiming that there are no shady dealings happening just because it’s cryptocurrency, and while that may be true – no one really knows that. That’s the point that I’ve been trying to make when it comes to cryptocurrency. No one really knows where the money comes from. If that information was more transparent, I guarantee you more businesses would be willing to deal in cryptocurrency, and more governments wouldn’t be putting regulation on it. Sure, we can rage at Canada all we want on this one, but other countries have put regulations around cryptocurrency, so how is that any different? It still “stifles” the use of cryptocurrency.
We should also note that it’s not just one financial institution in Canada that is doing this. Toronto Dominion (which holds a large stake in TD Ameritrade), as well as the Royal Bank of Canada, are also taking similar moves when it comes to crypto assets in certain scenarios. All that said, Coinsquare has reportedly secured a strong banking relationship with one of Canada’s “Big 5” banks, indicating that it might not be a large issue with cryptocurrency itself, but something more specific.