Australian banks impose ‘unlawful regulatory ban’ on crypto, says Coinbase

Coinbase has accused Australia’s big four banks of systematically denying financial services to legitimate crypto companies, calling the practice a threat to competition and confidence in the country’s economy.

In a brief submitted to the House of Representatives Standing Committee on the Economy, reviewed by Decryptthe Nasdaq-listed exchange warned that “the withdrawal of banking services, commonly referred to as ‘debanking’, has evolved from a sporadic operational anomaly to a systemic feature of the Australian financial landscape”.

The response, tabled last Saturday as part of a parliamentary inquiry into digital payments and innovation, claims Australian banks are suppressing banking access through two methods: unilateral account closures and transaction restrictions that stop or limit transfers involving digital assets.

“In Australia, the big four banks have implemented policies that hinder people’s ability to use their own money and remove banking facilities for consumers and businesses,” Coinbase wrote, referring to Commonwealth Bank, Westpac, ANZ and National Australia Bank.

The complaint comes as Coinbase faces new regulatory requirements to obtain an Australian financial services license from the Australian Securities and Investments Commission under legislation proposed last November, adding urgency to its calls for banking sector reform.

Debanking practices have “disproportionately targeted the Fintech sector and those using digital assets and blockchain,” the exchange said.

While four major banks control most transaction accounts and payment pathways, Coinbase has warned that account outflows may amount to an “unlawful regulatory ban,” excluding legal sectors from the formal economy.

“In 2021, up to 60% of fintech companies experienced denial of service from banks, a problem that still needs to be resolved,” the exchange said.

While banks often justify their closures on AML/CFT grounds, the crypto platform claimed that “the opacity of these decisions has created a crisis of confidence in the Australian financial system among its daily users”.

“There is nothing that degrades confidence in an economy faster than being told you can’t use your own money,” Coinbase noted.

Decrypt has contacted the big four banks for comment and will update this article if they respond.

The concerns come as Australia works to close crypto regulatory gaps with new licensing laws, after the Treasury last year acknowledged debanking and said it was “working with stakeholders to ensure transparency and fairness”, including talks with major banks to assess the extent.

International precedents

Coinbase cited foreign models for tackling financial exclusion, noting that the EU guarantees a basic bank account to all legal residents and that Canada allows almost anyone to open an account, even without a job or with a history of bankruptcy.

Meanwhile, in the United States, President Donald Trump signed an executive order last August directing regulators to prevent political or crypto-related debanking, and last month filed a $5 billion lawsuit against JPMorgan, alleging the company closed its accounts due to its political views following the events of January 6, 2021.

Five measures, still not applied

The exchange called on lawmakers to force banks to adopt five transparency measures initially recommended by the Council of Financial Regulators in response to the findings of the Senate investigation, but which were never legislated despite government support announced in August 2022.

The measures include requiring banks to document the reasons for excluding customers, provide those reasons to affected customers, ensure that unbanked individuals and small businesses have access to internal dispute resolution procedures, provide at least 30 days’ notice before closing core banking services, and self-certify compliance with these requirements.

Sebastian Sinclair contributed to this report.