The issue of 'debanking' has caused significant practical impediments for many companies, and individuals, wishing to expand in the digital currency space.
As the use of cash has continued to plummet over COVID-19, the position of payment providers and banks has become even more important. In a digital world, the absence of banking services can completely shut down a business. In the third issues paper released by the Senate Select Committee into Australia as a Technology and Financial Centre, the problem of debanking has risen in importance.
This paper follows the recently released second issues paper which updated the scope of work for the committee to be finalised in a report in October. Now, in the last phase of its inquiry, the committee will focus on "removing more barriers to Australian growth as a technology and finance centre".
A key part of this will be a focus on debanking. The issues paper states that:
Debanking has been raised as a significant obstacle to the further domestic development of the FinTech sector. The committee will be evaluating the policy framework and the role played by regulators in debanking.
In support, Senator Bragg said:
we cannot have these entities being effectively shadow banned by financial institutions merely because they pose a competitive threat.
Senator Bragg indicated during Blockchain Week that debanking may be linked to the uncertain regulation of digital currencies which support the Senate's focus on the regulation of digital currencies and digital assets. It is of course impossible to know as businesses which are debanked are usually never given any more information than the debanking is due to a "commercial decision" or the "risk appetite" of the bank. Senator Bragg has called for attention from the Australian Competition and Consumer Commission saying:
the ACCC has often declined to act, despite agreeing, in principle, that debanking is a major issue
Senator Bragg has highlighted that debanking could be driven by market or policy issues and that APRA may need to explore what isn't working for banks. This push for increased clarification around the policy position governing digital assets may well be a catalyst for change in the market sentiment as well.
Submissions on the issues paper are due by 30 June 2021.