In response to the increasing number of banks in Australia restricting services to cryptocurrency companies due to scams, the Australian Treasury has expressed concerns about potential consequences that may arise from debanking practices. Debanking refers to when a bank refuses to offer services to a customer, usually citing reasons such as Anti-Money Laundering (AML) compliance, sanctions, and reputational risks.
The Treasury noted that there is a lack of comprehensive data on debanking practices in Australia, making it challenging to design effective policy responses. To address this issue, the government emphasized the importance of insightful data to monitor and shape future policy responses concerning debanking. Failing to take action on the matter could stifle competition and innovation within the financial services sector and potentially drive businesses underground, operating solely in cash transactions.
Policy Responses and Guidance
One of the policy responses mentioned by the Treasury focuses on digital currency exchanges. Specifically, the authority advised the four major banks in Australia—Commonwealth Bank of Australia (CBA), Westpac, ANZ Group, and National Australia Bank—to provide guidance applicable to crypto exchanges and publish their requirements and risk tolerance for crypto service providers. It also expects banks to proactively communicate these requirements to existing and potential customers before refusing or withdrawing banking services.
The Treasury intends to collaborate closely with regulators, banks, and affected sectors to ensure the effectiveness and achievability of the agreed-upon recommendations.
Recent Actions and Conference
This move by the Australian Treasury follows recent actions taken by major banks in the country. In early June, the largest Australian bank, CBA, announced restrictions on certain payments to crypto exchanges due to scam risks. Similarly, Westpac had previously prohibited its customers from transacting with Binance crypto exchange in mid-May.
The Treasury’s efforts to protect the local crypto industry coincide with the ongoing Blockchain Australia event in Australia, which explores blockchain and cryptocurrency topics. During a panel discussion at the conference, executives from the “Big Four” banks in Australia shared their rationale for cutting services to crypto exchanges. They highlighted the significant impact of cryptocurrency-related scams on customers, with one executive stating that one in three dollars scammed from Australians is connected to crypto.
It remains crucial for regulators and industry stakeholders to strike a balance between mitigating risks associated with scams and fostering an environment that promotes transparency and innovation within the cryptocurrency sector.