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Australian banks warned against large scale ‘debanking’ of crypto operators

Australian banks warned against large scale ‘debanking’ of crypto operators

Last updated 30th Nov 2022

AUSTRAC, the Australian government’s anti-money laundering regulator, has recently given a lifeline to the country’s bitcoin industry by warning banks against closing their accounts.

The Australian Transaction Reports and Analysis Centre (AUSTRAC) has made it clear that the country’s counter-terrorism and anti-money laundering (AML) laws don’t obligate banks to close the accounts of bitcoin remittance and exchanges providers. 

Operators in Australia’s cryptocurrency sector have been raising concerns about being exiled from the Australian banking system because of running businesses dealing with virtual currencies. Debanking, where banks stop dealing with customers, has become an industry-wide practice targeting cryptocurrency entrepreneurs in Australia. 

AUSTRAC’s chief executive, Paul Jevtovic, pointed out that the regulator didn’t support the large-scale closure of accounts or termination of business relationships. Warning that it could disrupt the country’s economy and increase the risks of terrorism financing and money laundering, AUSTRAC discouraged accounts’ widespread and indiscriminate closure.

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Highly risk-averse Australian banks

Australian banks have become highly sensitive to reputational damages that accompany implications in terrorist or money laundering financing incidents. The Westpac Banking Group hit the headlines in 2013 when a $6 billion money-laundering operation moved funds through their accounts.

While Westpac wasn’t guilty of any wrongdoing, it demonstrated the possible reputational fallout that can accompany providing banking services to virtual currency providers. The media was quick to report that Westpac was in the middle of the biggest money-laundering scheme in the world. 

The case was instrumental in making significant banks in Australia highly risk-averse regarding cryptocurrencies. Currently, when banks assess customers as high risk, they simply close their accounts, deeming the cost of conducting enhanced due diligence to be too high. 

The cost of targeted crackdowns

The large-scale account closures have dealt a potentially fatal blow to close to 17 Australian Bitcoin exchanges. The viability of Australia’s emerging cryptocurrency industry is at risk because of the unexplained and opaque behavior of the central banks. 

Some Bitcoin startups like CoinJar have already jumped ship and moved to London because of concerns regarding regulatory and tax treatments of cryptocurrencies in Australia. The Australian Digital Currency Commerce Association (ADCCA) has also expressed concerns that Australia’s Bitcoin industry may disappear entirely if bank account closures continue. 

Large-scale account closures also create problems for regulators as they no longer have visibility on the de-banked sectors. AUSTRAC expressed concerns that industries like cryptocurrencies may move underground or base their operations offshore using the internet following such moves. 

Walter Akolo

Walter Akolo

Walter is a writer from Nairobi, Kenya. He covers the latest news on the cryptocurrency market and blockchain industry. Walter has a decade of experience as a writer.