Australia: Banking Institutions Asked to Serve Legit Fintech, Crypto, Remittance Firms

The government in Australia has noted that it would be issuing a formal response to a report advising banking institutions in the country of their duty to keep offering banking services to Fintechs, virtual currency trading platforms as well as remittance service providers. This, after the nation’s Treasury supported its primary recommendations.

As reported by AFR, a working group including the Council of Financial Regulators, Australian Competition and Consumer Commission and AUSTRAC suggested four different actions: the banking institutions must obtain and share data regarding “de-banking” activities, make their operational processes more transparent and fair, advise government of their risk tolerance and look into investing to enhance their capability to bank these industry segments.

The Council of Financial Regulators added that de-banking may negatively impact the progress of financial innovation.

The report has been commissioned after concerns that banks may be “debanking” or simply not agreeing to offer such services to Fintechs, crypto startups and other industry participants. This may potentially worse money laundering issues by forcing such firms out of the regulated/compliant financial system and also lead to competition issues.

The Treasury has also said that debanking could have a “devastating impact” on businesses as well as individuals. It may also negatively impact competition and innovation in emerging sectors.

The update also mentioned that the Australian government is “committed to promoting innovation and competition in the financial services sector and will continue to work with affected customers.”

The report pointed out that while banking institutions need to make commercial decisions, they also “have corporate social responsibilities.”

The report added:

“The government continues to place considerable trust in banks to act as gatekeepers of the financial system and to provide banking services that Australian businesses and consumers need to participate in the Australian economy. As the responsible operator of this gatekeeping function, they must exercise appropriate risk management procedures and processes to ensure that core banking services are reasonably accessible across the community. Denial of banking services to some groups and individuals would increase the risk that they are forced to operate outside the formal economy.”

The report further noted that banks must seriously consider offering banking services to legit firms in these industry segments as Treasury and other regulatory authorities focus on improving the nation’s payments, digital assets, and other applicable regulatory guidelines.

The report also mentioned:

“The agencies expect that the proposed package of policy measures, while not providing a complete solution to de-banking challenges, will have a positive effect and address some of the main frustrations experienced by the affected businesses. Some of the measures will also provide the government with more information on de-banking practices and a foundation for any future policy measures.”

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