Coinbase Calls Debanking a Systemic Risk in Australia

In a submission to the Australian Senate’s inquiry into the influence of international corporations, Coinbase described the widespread withdrawal of banking services from crypto-related firms as a systemic feature of the country’s financial system. The exchange claims that Australia’s “Big Four” banks — Commonwealth Bank, Westpac, NAB, and ANZ — are engaging in broad de-risking, refusing to bank digital asset companies based on their industry rather than an individual assessment of their risk profiles. This practice, Coinbase contends, forces legitimate businesses out of the formal financial system, potentially increasing risks for consumers.

The issue of debanking has been a persistent challenge for Australia’s fintech and crypto sectors. Banks often cite concerns over compliance with Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) regulations, which are enforced by the Australian Transaction Reports and Analysis Centre (AUSTRAC). Financial institutions argue that the high-risk nature of some digital currency transactions makes it difficult to meet their regulatory obligations, leading to a conservative approach of avoiding the sector altogether. According to a report from the Council of Financial Regulators, while debanking affects various industries, digital currency exchanges are among the most impacted, with a 2022 survey finding that nearly half had experienced the practice.

Coinbase’s submission argues that the banks’ behavior is anti-competitive and hinders the growth of a nascent industry. The company alleges that instead of performing due diligence on individual crypto businesses, which may have robust compliance frameworks, banks are applying a blanket ban. This creates significant operational hurdles for crypto startups, limiting their ability to pay staff, suppliers, and conduct business within Australia. The submission suggests this approach protects the incumbent financial institutions from competition from emerging fintech players.

The direct and specific responses from each of the “Big Four” banks to Coinbase’s latest submission have not been made public. It also remains unclear what specific legislative or regulatory changes the Australian government might consider following the Senate inquiry’s final report. A definitive timeline for when or if the Australian Competition and Consumer Commission (ACCC) might take action on the anti-competitive claims is also unknown.

The Senate Economics References Committee is expected to continue its inquiry and will likely hear from banks, regulators, and other industry participants before issuing recommendations. The outcome could influence future policy regarding the intersection of banking and digital assets in Australia. The crypto industry will be closely watching for any signs of government intervention that could lead to clearer guidelines for banks or the establishment of a formal appeals process for businesses that have been debanked.

For individuals and businesses operating in the Australian crypto space, experts advise the following:

• Maintain meticulous financial records and documentation of all compliance procedures.
• Proactively communicate with banking partners about the nature of your business and your AML/CTF controls.
• Where possible, attempt to diversify banking relationships to mitigate the risk of a single point of failure.
• Stay informed about the progress of the Senate inquiry and any subsequent regulatory updates from AUSTRAC or the ACCC.