For poorly explained reasons, the Australian government is setting out to develop “licensing frameworks for digital asset industry participants and payments providers that will help improve the risk management capability of businesses within the sector.”
“The government recognises that de-banking, which occurs when a bank declines to provide banking services or withdraws banking services from existing customers, is a global challenge” the Treasury said in a five page Statement on Developing an Innovative Australian Digital Asset Industry, released on Friday.
The Statement shows the Labor government is yielding to the lobbying and the antics of the crypto crowd, who have also found a more than receptive audience in the opposition Liberal and National Coalition.
“The digital asset sector is a key sector affected by de-banking” the statement notes.
“De-banking can have a devastating impact on de-banked businesses and individuals. It can also stifle competition and innovation in the financial services sector, and negatively impact Australia’s economy.
“The Government’s proposed licensing frameworks for digital asset industry participants and payments providers will help improve the risk management capability of businesses within the sector.”
In response to the Council of Financial Regulators paper “Potential Policy Responses to De-banking in Australia”, the government agreed to recommendations aimed at providing a better understanding of the extent and nature of de-banking and improving transparency, consistency and fairness for affected customers.
The government has been working with the four major banks to understand the extent and nature of de-banking.
A year ago, the Targeting Scams report called out the benefits of “bank action on cryptocurrency exchanges” a reference, in part, to de-banking.
AFCX data from the end of the 2022/23 financial year cited in that report indicated nearly half of all scam losses were processed through cryptocurrency exchanges.
From mid–2023, Westpac, CBA, NAB and ANZ and other banks have taken steps to limit transactions to ‘high risk’ cryptocurrency exchanges.
“This has likely reduced both direct scam payments particularly for investment scams, as well as reduced the incentives for some criminals to operate in Australia as transferring financial crime proceeds becomes more difficult” the report concluded.
The government, meanwhile, said that in parallel, it is working on “a comprehensive framework for payments service providers.
“The Payments Licensing reforms will revise the existing licensing regime for non-cash payment facilities and ensure it appropriately covers the wide range of payment products and services now provided in Australia.
“These reforms will cover the holding of monetary value for making payments …. As payment stablecoins are functionally similar to other SVFs, they will be subject to substantially the same requirements as stored-value facilities providers.”
The reforms will leverage the existing Australian Financial Services Licence (AFSL) regime.
They will require businesses providing these services to comply with certain existing financial services obligations, “together with tailored obligations to address the unique characteristics of these products.”