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Australian Businesses Ditch Bitcoin After Banks Act Against Bitcoin Exchanges

Last Updated March 4, 2021 4:45 PM
Lester Coleman
Last Updated March 4, 2021 4:45 PM

Australian businesses are turning their backs on bitcoin following the move by Australian banks last month to close bitcoin exchanges’ accounts, according to Reuters . Australian banks last month announced plans to close the accounts of 13 of the country’s 17 bitcoin exchanges.

The development is a blow to bitcoin’s chances of becoming a mainstream currency since Australia was considered one of its most promising bitcoin markets. Australia is estimated to hold 7 percent of bitcoin’s $3.5 billion global value, a sizeable figure in a country of just 24 million people.

“We’ve got a squeaky clean reputation, and that’s actually worth a lot more to us than dipping into this,” said James Snodgrass, principal of Sydney’s Forsyth Real Estate, which stopped using the currency in late 2014 after the company was investigated by the federal tax office.

Forsyth had offered to collect home deposits and other realtor fees in bitcoin to cater to international buyers. The tax office probe uncovered no wrongdoing, but Forsyth’s reputation was tarnished by the negative publicity. The company decided to ditch bitcoin before ever taking a bitcoin payment.

At least six Australian retail businesses, which as recently as 2014 courted publicity for offering sales by bitcoin, said they were considering no longer using the currency.

“If governments begin to aggressively attack the whole idea of cryptocurrencies and give it a bad name, it might have an adverse effect on our brand by accepting it,” said David Brim, co-founder of Tomcar Australia, an off-road vehicle maker which has sold one car using bitcoin after introducing it in November 2014.

Grant Fairweather, the owner of the Metropolitan Hotel in Sydney, said he started accepting bitcoin when some digital currency fans chose his pub as their regular meeting venue.

“They tell me that it’s doing quite well, but that doesn’t transpose into here,” said Fairweather. He said he sells about $100 ($70) worth of drinks via bitcoin from the meetings and does no other bitcoin trade.

An online clothing retailer told Reuters she has made no bitcoin sales since introducing the service in 2013. She asked not to be named, saying “since bitcoin’s going out anyway, we’d rather not throw our name back into it.”

First Coordinated Move By Banks

Developments in Australia represent the first coordinated shutdown of bitcoin exchanges by a country’s banking system. Most mainstream banks in Europe and the U.S. do not keep bitcoin accounts.

The banks’ move makes it harder for people to convert regular currencies into or out of bitcoin.

“It really runs on people using bitcoin, and if nobody uses it then it’s worthless,” said Adrian Lee. A University of Technology Sydney senior finance lecturer.

The banks’ actions were especially discouraging to bitcoin supporters in light of the fact that in August, a government inquiry recommended removing sales tax for people who buy bitcoin.

AUSTRAC, Australia’s anti-money laundering agency, told Reuters that banks have no legal obligation to close bitcoin accounts.

Australia’s “Big Four” banks – Commonwealth Bank of Australia, Westpac Banking Corp., Australia, and New Zealand Banking Group and National Australia Bank – directed inquiries about bitcoin to the Australian Bankers’ Association.

Tony Pearson, the association’s acting chief executive, would not confirm the coordinated rejection of bitcoin but said via email that its “lack of transparency and regulatory oversight raises a number of risks for users and also poses risks for the payments system, the integrity of the financial system and the erosion of the tax base.”

Anti-Crime Agency Raises Concerns

Australia’s organized crime agency has voiced concern that bitcoin’s untraceable nature makes it attractive for money laundering and illicit drug sales.

In the U.K. and the U.S., most large banks have already cut ties with bitcoin account holders, but not in a coordinated manner. The lack of industry coordination has left room for individual lenders to support the bitcoin, including Germany’s Fidor Bank AG, which operates in Britain, and Silicon Valley Bank, a technology-focused lender in California.

The 13 Australian bitcoin exchanges whose accounts were closed by the banks have shut operations.

Remaining Bitcoin Exchanges Feel Pressure

The remaining four bitcoin exchanges in Australia have had their accounts frozen. These exchanges now face three options: close, move overseas or spread their business into smaller bank accounts to avoid detection.

Buyabitcoin.com.au, one of the remaining exchanges, said it is considering its options.

“It makes it, obviously, hard to take payments from our customers, but we have a couple of relationships left,” said Andrew Smith, general manager of the Melbourne-based exchange. He declined to identify which bank his firm is now using for fear of repercussions. He said he plans to move the business offshore.

Two sources told Reuters that Bank of Queensland, a regional lender, still held some bitcoin accounts. The bank said in an email that “virtual currencies fall outside of our risk appetite,” but it did not deny or confirm it had these accounts.

Some industry watchers believe ambivalence may be bitcoin’s biggest problem.

Images from Shutterstock.