Recent restrictions imposed by Australian banks on cryptocurrency payments have raised concerns among the country’s blockchain community.
Blockchain Australia, the country’s industry body, has expressed its opposition to the recent restrictions on crypto payments imposed by Australian banks.
The Commonwealth Bank of Australia (CBA) has cited scams as a contributing reason for its decisions, prompting industry stakeholders to take action against these limitations.
In a Wednesday announcement, Blockchain Australia emphasized the importance of using real data to address the issue rather than implementing blanket restrictions.
“The recent decision by banking institutions to restrict millions of their customers from making payments to cryptocurrency exchanges represents a profound restriction on economic freedom in Australia,” said Jackson Zeng, director of Blockchain Australia.
Blockchain Australia emphasizes that such restrictions have far-reaching effects, limiting consumer access to funds and potentially pushing individuals towards harder-to-detect illicit activities.
The CBA has implemented limits on payments to high-risk cryptocurrency exchanges to protect customers from fraud and comply with regulations.
In an official announcement last week, the bank revealed that it will use a risk-based approach to identify and apply lower daily limits for sending funds to these exchanges.
The restrictions, including monthly transaction limits and payment restrictions to crypto exchanges, were implemented by the CBA due to concerns over scams and frauds in the crypto industry.
“Customers who make payments to cryptocurrency exchanges are currently facing a significantly higher risk of potentially being scammed,” the bank wrote.
Although the bank recognizes the importance of innovation in the financial sector, it said that it should remain committed to preventing financial crime and protecting customer funds. However, the specific exchanges affected have not been disclosed.
The CBA said it will continue to monitor the crypto market and adjust its position accordingly as the industry evolves.
Several other Australian banks have also recently implemented more restrictions against payments to cryptocurrency exchanges prior to this move. NAB and Westpac have enforced similar curbs on crypto transactions due to regulatory scrutiny and customer protection concerns.
In addition, Binance Australia has also specifically suspended AUD deposits and withdrawals via wire transfer. It was said that this decision was taken due to a third-party payment service provider’s policy.
In response, Blockchain Australia warns that such limitations could have costly side effects and advocates for a more nuanced approach to ensure the security of cryptocurrency transactions.
Blockchain Australia opposes the restriction of banking services for crypto exchanges and believes consumer protection should be regulated by authorities, not banks.
Acknowledging the risk of scams and frauds within the crypto industry, the trade body highlights that registered digital asset exchanges in Australia are already subject to the country’s anti-money laundering supervisory body.
The Australian Transaction Reports and Analysis Centre has placed quite elaborate measures to supervise and identify illicit transactions.
“Banking is an essential service to nearly every Australian business in our increasingly digitized economy, and there is an outsized impact on all customers of a business when payment restrictions or debanking takes place,” said Michael Bacina, Chair of Blockchain Australia.
“In many cases, it can be fatal for the business.”
🔵 Media Release
Blockchain Australia Responds to Banking Limits on Crypto Payments. Initiatives include:
🔹Recognition of industry best practices
🔹Hosting an Industry Roundtable on June 27, 2023.
— Blockchain Australia (@BlockchainAUS) June 14, 2023
Collaboration among regulators, financial institutions, and industry stakeholders is crucial to finding sustainable solutions ensuring consumer protection and fostering industry growth.
Blockchain Australia advocates for an effective approach to combat cryptocurrency-related scams through opt-in protection and targeted education for at-risk customers.
The industry body will host a roundtable discussion on June 27 during Blockchain Week in Australia to address the issue. Australian Deputy Treasurer and Minister of Financial Services Stephen Jones, along with the Australian Securities and Investment Commission, will participate in the discussion.
On top of raising awareness about the negative consequences of blanket restrictions on cryptocurrency payments, the industry body plans to launch a consumer education program to combat concerns.
This education program aims to educate users about cryptocurrencies and the industry itself. Not only highlighting the benefits of this innovation, the program will also provide guidance on how to identify scams and how to look for trustworthy players in the industry.
This targeted approach, coupled with education and notification, aims to strike a balance between consumer protection and financial innovation. It highlights the role of banks as facilitators rather than enforcers of restrictions.
Embracing cryptocurrencies and implementing consumer protection measures allows banks to adapt to the evolving financial landscape while fulfilling their core responsibilities.
Situations in other countries
Banking restrictions on cryptocurrency, especially regarding payment methods, are not limited to Australia, as other countries face similar challenges in the growing cryptocurrency sector.
The Securities and Exchange Commission (SEC) in the United States has also taken a cautious approach, fueling the phenomenon some refer to as the crypto winter. The SEC classifies certain cryptocurrencies as securities, subjecting them to securities regulations.
This classification requires companies issuing tokens to comply with registration and disclosure requirements, similar to traditional securities offerings.
Although this regulatory framework in the US aims to provide clarity and protect investors, it can be seen as restrictive for some crypto startups due to compliance costs and regulatory hurdles.
However, not all countries are opting for restrictive approaches.
In Europe, the long-awaited European Union’s Markets in Crypto-Assets (MiCA) legislation has been signed into law, paving the way for uniform requirements and standards for the cryptocurrency industry across the continent.
The EU’s MiCA legislation mandates that crypto firms must be authorized by the EU and adhere to anti-money laundering and terrorism financing safeguards. Only then can they offer their services to customers across all 27 countries within the bloc.
The rollout will occur in phases starting from July 2024 to allow for industry adaptation but some countries have made apparent moves to welcome the new crypto era in EU.
Several countries, like Ukraine, are preparing to adopt the MiCA law to enhance transparency and regulation in their own crypto industries. Meanwhile, France is already vying for crypto firms’ attention.
The same welcoming approach can be seen in Brazil. Effective June 20, 2023, a new Brazilian law will grant regulatory authority to the central bank and securities commission to oversee cryptocurrency agencies.
This move gained praise from industry players, saying that the country is making its way in the right direction with its regulatory approach that aims to establish clear responsibilities for cryptocurrency supervision.