This is the story of SurBTC, a Chilean bitcoin exchange which allows users to buy and sell bitcoin using their online matching engine, which was just getting started in an area with more and more demand for bitcoin. Unfortunately, they’ve been hit with a blockade by Santander Bank Chile, and have lost 70% of their customer base.
It all started seven months ago when SurBTC learned from Santander Bank that a customer who purchased $500,000 CLP ($755 USD) of bitcoin, later went back to the bank after receiving the bitcoin and said it was a scam and they wanted their fiat dollars back.
Just a few short weeks later, SurBTC started receiving complaints from customers saying they could not perform bank transfers to the exchange to buy bitcoin. Through the exchange’s own investigation of customer issues, they realized all the customers with issues all had Santander Bank accounts.
SurBTC contacted Santander Bank Chile, and was told early on that all of these customers were experiencing technical problems with their corresponding bank, Chilean bank, Banco Itau. Of course SurBTC asked Banco Itau what the problems were, and they told the exchange they were no problems. The exchange estimated that they were losing about 30% of their business due to the ongoing issues.
The problems get bigger
SurBTC was pulling it’s hair out trying to get to the bottom of the issue and figure it out between the two banks. At this point, the problems began to get worse.
The exchange found out that customers that were trying to deposit from other banks were all failing too. Customers from Banco Falabella, Banco Estado, Banco Security, among several others were all no longer working.
“All of our business was being terribly affected and we did not know what to do. We were the perfect example of buying eggs, always going and coming away empty-handed. We begin to lose customers per hour. The problem is that it was no longer a 30% market share loss, but about 70%,” Guillermo Torrealba CEO of SurBTC wrote.
The exchange was now losing massive amounts of business due to 70% of their customers not being able to use their banks to transfer funds to the exchange. After a few more weeks of back and forth, trying to figure out the issue on their own, it seems SurBTC stumbled on a possible reason on why nobody can do bank transfers with them.
While researching the issue, they ran into an error page on the Banco Bice website, where the error indicated the issue was with the Automated Clearing Center. After looking into the error, they contacted Santander only then to find out from them that Santander had put the exchange on the Centro de Compensacion Automatizado’s (CCA) “black list.”
The CCA in Chile operates like many other bank clearing houses, which has a large network of banks in and around Chile that coordinates bank transfers between them. With Santander placing the exchange on the CCA’s black list, the exchange was essentially blockaded from almost every bank in Chile, shutting down their business nearly instantly.
Guillermo Torrealba said,
“We felt that our rights were being violated. At Santander we were not only unfairly blocked without warning, but also the reason was hidden from us on why they failing the bank transfers. They also said we were lying or were grossly negligent, both alternatives with equal consequences for our company. […] Perhaps, we thought, they were trying to give us a lesson, so that other SMEs will not dare to speak out and refused to pay the amount requested, as we did. If so, they succeeded, because after 7 depressing months trying to resolve this with them and with the Superintendency of Banks (SBIF, whose response was: this must be resolved between the parties), we finally decided to “bend the bow” and pay $500,000 we now steal from us. Tragic but necessary.”
Although $755 USD may seem like a small amount of money overall to get your business restarted and remove the blockade, to SurBTC this was enough money for the small startup to think twice about the issue. They were out of the bitcoins, as the customer received them, plus they would pay back the bank, doubling the amount lost to $1510 USD.
Torrealba says that SurBTC has 2000 customers and has processed nearly 10,000 deposits and withdrawals, and takes their business seriously. Although they were losing double the money, SurBTC said they would pay the funds to Santander to resume business and remove the blockade.
Do not pass Go. Do not collect money.
With SurBTC ready to pay the funds to Santander, a new wrinkle unfolded. Santander Bank said they could not collect the money until the SBIF solved the problem. Until the problem was resolved with SBIF, the blockade would remain.
Chilean banking regulator SBIF is a public institution responsible for regulating and overseeing banking and financial institutions that operate in Chile.
At this time, SurBTC is still under the blockade, unable to process over 70% of customer bank transfers which is debilitating their business. The Chilean startup has written a letter, in hopes to bring more eyes to the issue to draw attention, and maybe get some leniency from the banking cartels.
SurBTC has also recently received the help of the Association of Entrepreneurs of Chile (ASECH), who has assigned them a group of lawyers who are trying to help resolve the issues on their behalf.