Over the past two years, the bitcoin exchange climate in Australia has been both hot and cold, going through different phases which has created a challenging environment for exchange operators and bitcoin startups in the country.
It started out positive, with the National Australia Bank publishing a report in 2013 asking if Bitcoin will replace the AUD. The report at the time was exploratory and neutral toward bitcoin. Then last year the Australian Tax Office (ATO) released it’s tax guidelines on bitcoin which forced exchange transactions to be subject to Goods and Services Tax (GST). Also during this time, credit card giant MasterCard made it clear that they were lobbying against bitcoin asking for more regulation in Australia.
A positive signal this year, was when it was discovered that Australian Westpac Banking Corp was an investor in US based bitcoin exchange Coinbase. However, just two weeks ago there was another setback which has created the biggest challenge yet for exchanges. Westpac Banking Corp and Commonwealth Bank of Australia sent letters to several bitcoin exchanges suddenly shutting down their banking accounts and services.
Cracking down on AML and the CTF Act
According to the Centre for Law Markets and Regulation in Australia, banking sources said that bitcoin exchanges had been triggering high levels of red flags in the banks’ AML systems and controls and this had prompted the crackdown. They said this had triggered the so-called “de-banking” of large numbers of clients in the remittance and payday lending sectors. They also went on to say “this all comes back to reputational risk, compliance costs and concerns about pressure from U.S.-based correspondent banks.”
The increasingly difficult environment in Australia has created a few roadblocks for bitcoin exchanges in the country, forcing some to shutdown completely. The targeted account closures recently forced one exchange to leave Australia all together.
Rundown of bitcoin exchanges in Australia
Here’s the who’s who of exchanges in Australia. Who’s left, who has shutdown, and who is still operational.
- Coinjar – when the recent banking shutdown happened, Coinjar picked up and left Australia and now operates in the United Kingdom.
- SpendBitcoins – due to regulatory uncertainty, SpendBitcoins stopped selling bitcoins and sold their platform to a third-party.
- DWV Exchange – just launched in 2015, this Australian exchange had potential. However, because of the banking issues they abruptly shutdown in September.
- CryptoCoin Australia – another exchange shutdown abruptly due to the ongoing banking issues in Australia.
- BTC Markets – a recent bank change to Bank of Queensland has allowed BTC Markets to remain open for business in Australia.
- Independent Reserve – it’s unclear how, but this exchange must have good banking relationships as they have been able to remain open for business in Australia.
- Bit Trade Australia – this exchange has also been able to remain open in Australia.
- CoinTree – a bitcoin exchange that has seen their fair share of compliance issues, has been able to stay afloat and is still open for business in Australia.
- Buy a Bitcoin – this brokerage exchange also has been able to remain open in Australia.
- Coin Loft – another bitcoin brokerage exchange, which has been able to remain open for business.
- igot – this exchange is still open for business, although they have been experiencing a lot of compliance and banking issues.
Transaction volume in Australia tells a different story
Amid all of the banking and regulatory issues in Australia, the amount of bitcoin transactions seem to tell a story of a thriving market. The chart above is from coin.dance, which shows the LocalBitcoins weekly transaction volume in AUD which is on a steady climb.
LocalBitcoins, who by the way ranked #1 as the best bitcoin exchange on the market by the bitcoin community, is a great example of how banks are not able to impact bitcoin’s decentralized nature. Because LocalBitcoins uses a person-to-person trading system, there is no bank involvement, and each person just trades bitcoins with each other. Outside of LocalBitcoins, other exchanges that remain open in Australia, for example BTC Markets, are still showing healthy transaction volume as well.
The future of bitcoin exchanges in Australia is unclear
Outside of Australia, banks have been embracing bitcoin and blockchain technology in huge waves and the CFTC in the U.S. says that bitcoin is now a commodity. Exchanges are blossoming in the U.S. as well, despite the onerous BitLicense and venture capitalists are still pouring tons of money into bitcoin exchanges.
Clearly not all exchanges in Australia have been shutdown despite some recent banking closures, and several banks in Australia are still willing to work with exchanges and provide them services. The market demand appears to be there, the regulatory climate seems permissive, and startups want to build in Australia. However, if the banks continue to blockade bitcoin startups, they will be forced to shutdown or leave.