Monday, May 16, 2022

ANZ’s crypto stablecoin minted for billionaire and wealthy investors reminds de-banking remains a threat to smaller fintechs

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The ANZ stablecoin was founded for the investment company of the billionaire Smorgon family, Victor Smorgon Group, which was issued in February with the 30 million A$DC.

Unlike other popular stablecoins, A$DC is not available to retail investors and is instead built to facilitate digital asset transactions between wealthy institutional investors.

Stablecoins, unlike many crypto assets, algorithmically maintain a consistent value pegged to a traditional asset (e.g. fiat currency and commodities) and are typically claimed by their issuers to be 1:1 backed with that asset.

ANZ’s new product, while not getting a wide release, is the latest foray by Australia’s big four banks into crypto and digital assets, and has received mixed response from the local emerging fintech and cryptocurrency industry.

For years, Australia’s major banks have made it difficult for local digital assets and cryptocurrency companies to do business by freezing or denying them corporate bank accounts under the auspices of compliance risk.

Dubbed “de-banking,” the phenomenon has impacted international payment platforms, fintechs and crypto firms for years, sparking criticism that banks are hiding behind anti-money laundering and terrorist financing requirements to crush competition.

An industry insider who spoke on condition of anonymity to avoid retaliation from the banks described de-banking as a “anti-competitive” strategy that gave banks time to develop their own crypto products.

“The room is now filled with the big players, they are stealing the lion’s share of the vote, while the real innovators are being bullied,” the insider said, adding that the banks’ power as financial gatekeepers has quelled public criticism. against de-banking.

“Everyone is still hoping to get accounts with these banks one day and don’t want to get confused.”

For local crypto startups, the bank-led lockout has flow-on effects, including that other global payment platforms will enforce the policies of Australia’s big four.

“For instance, [international money transfer platform] Wise doesn’t want to give us an account, so I can’t pay designers in Europe,” said the industry insider.

de-banking

Of course, ANZ is not the only bank dipping its toes in crypto.

Commonwealth Bank launched its own cryptocurrency exchange last year, linking the service directly to the CommBank app that existing customers use.

And Westpac – who is entangled in his own significant compliance issues – $288 million through its venture capital arm Reinventure, which had a stake in US cryptocurrency Coinbase when it went public on NASDAQ last April.

An ANZ spokesperson said it “is the policy of the bank in general not to engage in banking operations that operate as issuers, dealers or exchanges of digital or crypto currencies, as they are outside our current risk appetite.”

Andrew Porter, the new CEO of industry group Fintech Australia, said he’s seen de-banking firsthand.

“I personally attended those bank meetings,” Porter said. “I have received letters warning that you have 30 days to complete your account.”

He said members of Fintech Australia are still dealing with de-banking and warned that while there may be no evidence that the practice is strictly anticompetitive, it makes Australia an undesirable place for companies to do business.

“It seems absolutely broken,” Porter said. “It is a very sad state of affairs and is an indictment of Australia as a business destination.

“We want to be a hub for this kind of innovation and industry, but unfortunately we’re seeing talent leaving Australia, companies going offshore to expand and foreign companies staying away.”

The government said so want to fix the issue of de-banking and has put it on the reform agenda that would take place when it returns to government after the upcoming elections.

Silver lining

Meanwhile, other local cryptocurrency operators — who may have been frustrated by de-banking challenges in the past — are seeing the banks’ moves toward cryptocurrency as a sign that digital assets and cryptocurrency are becoming mainstream.

“We are happy that [Commonwealth Bank] and ANZ both embrace the possibilities of crypto and blockchain technology,” said Caroline Bowler, CEO of crypto exchange BTC Markets.

“Combine this with the regulatory actions of the past 12 months and Australia becomes a crypto-friendly economy, well-positioned for the future.”

Porter also sees a bright spot in cryptocurrency adoption by major banks.

“The advantage of these institutions is that hopefully they understand the risks that prevented them from banking on these companies,” he said.

“If they can better understand those risks and better address these issues, we hope we can push for more collaboration.”

When asked whether it is investigating de-banking as an anti-competitive act, a spokesperson for the Australian Competition and Consumer Commission (ACCC) said the regulator was unable to comment on investigations or specific companies.

However, they said there were “complex competition and innovation implications” related to de-banking, cryptocurrencies and fintechs.

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