Coinbase Accuses Australian Banks of Systematic Financial Exclusion
In a fresh blow to the legitimacy of cryptocurrency operations in Australia, Coinbase has leveled serious accusations against the nation’s largest banking institutions, claiming they are engaging in systematic financial exclusion of credible crypto firms. Highlighting the detrimental effects on competition and public trust, the Nasdaq-listed cryptocurrency exchange submitted a statement to the House of Representatives Standing Committee on Economics, which was obtained and analyzed by Decrypt.
Debanking Practices in the Australian Banking System
Coinbase’s report indicates that the practice, termed ‘debanking’, is no longer an occasional issue but has become entrenched in the Australian banking system. It pointed to two primary tactics employed by the major banks—unilateral closures of accounts and restrictions on transactions related to digital assets—that restrict the ability of consumers and businesses to manage their own funds.
The complaint specifically targets Australia’s Big Four banks: Commonwealth Bank, Westpac, ANZ, and National Australia Bank. Coinbase stressed that these institutions’ actions reflect policies that inhibit individuals from utilizing their own finances effectively.
Regulatory Challenges and Urgency for Reform
This assertion comes at a critical juncture for Coinbase as the company navigates new regulatory requirements mandating that it secure an Australian Financial Services Licence from the Australian Securities and Investments Commission. The licensing regime, introduced in response to evolving digital payment landscapes, adds urgency to Coinbase’s call for reforms within the banking sector.
Highlighting a broader industry concern, Coinbase reported that denial of service by banks disproportionately affects fintech companies and users engaged with digital assets. They noted that with the Big Four holding a commanding presence over transaction accounts and payment infrastructure, the banking sector’s withdrawal can effectively create an “unlawful regulatory ban,” sidelining compliant businesses from participating in the economy. According to statistics from 2021, as many as 60 percent of fintech enterprises reported service denials by banks, an ongoing challenge that needs immediate attention.
Trust Crisis in the Financial System
While banks typically cite Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) regulations to justify account closures, Coinbase argued the lack of transparency surrounding these decisions has fostered a crisis of trust within the Australian financial system.
“Nothing erodes faith in an economy more quickly than being barred from using your own finances,”
reiterated the exchange.
Government Response and International Models
As Australia contemplates reforms in crypto regulations and implements new licensing frameworks, the Treasury recognized the issue of banking exclusions, asserting its commitment to work with stakeholders to enhance systemic transparency and fairness. Coinbase highlighted successful international models that provide guaranteed banking services, such as the European Union’s basic bank account right for all legal residents and Canada’s inclusive banking policies that allow extensive access even for those with a bankrupt past.
Calls for Legislative Action
Furthermore, in contrast with the situation in Australia, moves in the United States reflect a proactive stance on protecting individuals from unwarranted debanking. For instance, an executive order by former President Donald Trump aimed to prevent politically motivated financial exclusion, and he subsequently initiated legal action against JPMorgan for alleged improper account closures related to his political stances.
To combat these issues, Coinbase urged lawmakers to enforce essential transparency regulations as initially recommended by the Council of Financial Regulators following Senate inquiries. These proposed measures include:
- Mandating banks to document and disclose reasons for customer debanking.
- Ensuring access to internal resolution processes for affected individuals.
- Providing advance notification before closing fundamental banking services.
As developments unfold, Decrypt has reached out to the Big Four banks for their perspective and will update this coverage accordingly. Meanwhile, the call to action for reform in Australia’s banking practices continues to gain momentum among stakeholders advocating for the rights of crypto firms and their clients.
