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Cryptogambling / Australia’s Commonwealth Bank tightens restrictions on crypto payments

Australia’s Commonwealth Bank tightens restrictions on crypto payments

Publish Date: 09/06/2023

A Commonwealth Bank branch office - CC BY-SA

The Commonwealth Bank of Australia has imposed a 24-hour hold on “specific payments to cryptocurrency exchanges” to combat the surge of fraudulent activities surrounding cryptocurrencies.

The bank has also refrained from disclosing the specific types of payments that will be blocked or held, aiming to prevent scammers from circumventing these restrictions.

CBA announced plans to implement a monthly limit on the amount customers can send to cryptocurrency exchanges as well. According to the bank, this measure aims to provide customers with an additional layer of protection by allowing for thorough verification before funds are transferred.

This limit will cap customer payments aimed at purchasing cryptocurrencies to a maximum of AUD 10,000 (about $6,700) per month. The bank plans to roll out this limit in the coming months.

James Roberts, general manager of CBA’s fraud management services, voiced his concern over the rise of crypto scams and the exploitation of individuals seeking legitimate investment opportunities.

He also said that “customers who make payments to cryptocurrency exchanges are currently facing a significantly higher risk of potentially being scammed,” which leads the bank to take the above actions.

Policy changes

CBA’s decision marks a significant shift in its approach to cryptocurrencies. Just months ago, in November 2021, the bank was on the verge of launching crypto trading services for millions of its CommBank app users, a position that sharply contrasts with its current stance.

In an effort to combat high-risk crypto exchanges, Commonwealth Bank’s protective measures coincide with recent legal action taken by U.S. regulators against two major exchanges — Binance and Coinbase.

Along with its lawsuit, the United States Security and Exchange Commission (SEC) has dubbed Binance and its CEO Changpeng Zhao to be operating in a “web of deception.”

Meanwhile, Coinbase is accused of evading disclosure requirements and trading securities without proper registration. The lawsuit alleges that Coinbase has operated as a middleman on cryptocurrency transactions since 2019, generating billions of dollars in revenue. The SEC claims that Coinbase traded at least 13 crypto assets that should have been registered as securities.

Following the news of the lawsuit, Coinbase experienced a significant net customer outflow, with estimates suggesting around $1.28 billion. The parent company’s shares, Coinbase Global Inc, also dropped by 12.1 percent and had previously fallen as much as 20.9 percent during the trading day.

Analysts suggest that the SEC’s regulatory actions are just the beginning and that other exchanges could face similar scrutiny. Despite the crackdown, the leading cryptocurrency, bitcoin, experienced a rebound in its price following the initial market reaction to the news. Some believe that the SEC’s focus on altcoins is driving traders back into Bitcoin.

Global reaching repercussions

CBA’s decision is a response to the challenges faced by traditional banks in recovering funds from cryptocurrency exchanges that often facilitate instant cross-border transfers.

The bank declined to name the specific exchanges subject to the new restrictions. However, it is implied that the ban includes Binance, which recently lost its Australian banking partner, Cuscal, and its ASIC-issued derivatives license.

While CBA’s decision may impact some customers, the bank stresses the importance of taking assertive measures due to the significant scale of investment scams involving crypto exchanges. The implementation of these protective measures will be closely monitored and subject to continuous evaluation.

These regulatory moves in the U.S. do not directly regulate cryptocurrencies in Australia, but they contribute to the evolving landscape of crypto regulations worldwide.

The varying levels of “know your customer” governance have led to a divide between global exchanges like Binance and local players such as BTC Markets. Binance allows customers to begin trading with relatively few verification checks, while local exchanges have adopted onboarding processes with similar due diligence requirements as traditional banks.

Caroline Bowler, CEO of BTC Markets, emphasized the collaborative efforts of the local industry and successive governments in drafting an appropriate regulatory framework within Australia.

She also highlighted that Binance, in addition to its exchange registration issues, faces allegations of intentionally bypassing U.S. laws to solicit American crypto-trading customers.

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