Banks Signal Cryptocurrency Hesitancy
(17 September 2021 – Australia) NAB and Westpac have attributed hesitancy towards the wider scale offering of cryptocurrency opportunities to the need for a vastly improved risk management, transparency and regulatory framework.
Both Big Four majors strenuously rejected assertions they are obstructing competition in the Australian banking and finance sector at a parliamentary committee to address questions on deposits and lending practices, including the decision to ‘debank’ or refuse service to cryptocurrency aligned enterprises. Both groups found digital currencies posed significant risks due to the uncertainly surrounding the technology, giving them no choice but to opt-out of dealing with such firms at this time.
Westpac has ‘debanked’ eight fintechs in 2021, deeming them too high a risk to extend banking services to. NAB did not disclose how many fintechs it no longer provides services to, outlining the bank’s “decisions to exit the banking relationship with a fintech are informed by NAB's risk appetite”. Despite NAB and Westpac's caution, Macquarie recently partnered with Canadian distributed ledger technology (DLT) company Blockstream to pilot a bitcoin mining facility with a focus on developing alternative renewable energy options for mining virtual coins. “Bitcoin mining” refers to the process of generating new cryptocurrency for circulation and consumes enormous power resources.
NAB CEO Ross McEwan dismissed Liberal Mackellar MP Jason Falinski’s claim that refusal of banking services could be classified as anti-competitive behaviour, highlighting a raft of critical question marks over the accountability and practicalities of cryptocurrency-based corporations.
“One of the things that underlines a bank is we have to manage risk. That's what we do all day every day. Could you tell me the future of cryptocurrency? Could you tell me what the risk is if I allow it to come in? What liability do I wear for something that goes wrong? The bank's relationship with the cryptocurrency sector is an “emerging issue”. We are unsure where digital currencies fit in the financial landscape. We'd have to look at where does cryptocurrency go along with a number of parties like the Reserve Bank and regulators. We need a seriously good look at what is the role, if there is a role for cryptocurrency, or any other form of money movement” NAB CEO Ross McEwan stated.
“In relation to cryptocurrency, Westpac can't get itself comfortable because it's anonymous money and therefore we can't meet the regulations. We've looked at the requirements and what we would need to do and the cost of getting it wrong versus the return we get for it, and haven't got ourselves there on the risk-reward equation” commented Westpac CEO Peter King.