Crypto in Australia remains largely estranged from the mainstream financial system because the most important players refuse to do business with crypto firms, namely the big four banks and the Australian Stock Exchange (ASX). Since the ASX will not permit crypto-related listings, Australian crypto firms have had to go public overseas, such as on the Nasdaq. The banks, meanwhile, are worried about falling afoul of anti-money laundering rules.
This should not be surprising. Incumbent financial institutions have reason to be conservative about an emerging asset class they do not understand well, that is known for anonymous transactions (a problem for compliance at banks) and that is barely regulated. These are not loss-making fintech startups we are talking about – which sometimes look to crypto trading as a key revenue stream – but entrenched traditional banks that are already highly profitable.
They are unlikely to take a risk on crypto now, especially not the banks who have been stung by recent AML-related penalties. In 2018, Commonwealth Bank of Australia (CBA) paid a then record A$700 million penalty for breaches of AML and counterterrorism laws. Westpac recently paid the heftiest AML fine in Australian history. As of June, National Australia Bank (NAB) was being investigated for suspected serious breaches of AML and CFT laws.
"We have to look at where does cryptocurrency go, along with ... the reserve bank and regulators. And what's the risk inside the bank of dealing with cryptocurrency providers as well,” NAB Chief Executive Ross McEwan said at a regular parliamentary hearing in September.
Senator Andrew Bragg, Chair of the Select Committee on Australia as a Technology and Financial Centre, told Information Age in August that the government recognizes cryptocurrency is an “area of full of opportunity and full of risks.”
Currently, the ball is in regulators’ court. If they are willing to develop a comprehensive regulatory framework for cryptocurrencies in Australia, then it is likely that incumbent financial institutions will have a more open mind about crypto. The Select Committee on Australia as a Technology and Financial Centre is due to present a report before October 30 that will cover, among others things, “opportunities and risks in the digital asset and cryptocurrency sector; and any related matters.”