Australian banks say 40% of scams ‘hit’ crypto as they defend restrictions

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The Australian cryptocurrency industry’s banking troubles are likely to continue, with the government and major banks signaling no intention of backing down on scams that affect crypto.

During a panel at Australian Blockchain Week on June 26, Sophie Gilder, managing director of blockchain and digital assets at Commonwealth Bank (CBA) shed some light on the bank’s restrictions on exchange payments of crypto, noting that it was set up after seeing an alarming rate. of scams that ended up involving cryptocurrency.

One in three dollars that are defrauded by Australians hits crypto, one in three. So that’s the biggest lever we have to reduce that impact on our customers, she said.

Commonwealth Bank’s Sophie Gilder speaking on a panel during Australian Blockchain Week. Source: Cointelegraph

Nigel Dobson, portfolio manager for banking services at ANZ, pointed to data from the Australian Financial Crimes Exchange which suggests the figures could be even higher at 40%.

On June 8, the CBA followed Westpacs’ lead by imposing pauses, limits and outright blocks on certain payments to cryptocurrency exchanges, both citing a growing threat of investment scams. Australia’s other two big banks, ANZ and NAB, have not yet indicated whether they will impose similar restrictions.

A Treasury official has confirmed that the decisions made so far have come from the banks’ own volition, but that the banks and the government share the view that cryptocurrency scams are at an unacceptable level for the moment.

From the government’s point of view, [they] need to invest more in reducing scams, and that’s the government, but it’s also the banks, other people in the financial system need to work together to reduce scams to maintain trust in the system,” Trevor said. Power, Assistant Secretary of the Australian Treasury.

Not an attack on crypto

However, Gilder clarified that the CBA’s actions were not designed to attack the industry and did not necessarily reflect wrongdoing by centralized exchanges.

It is not industry specific. It is based on data, behavioral patterns and the identification of bad actors. So we already do that with normal bank accounts. So in that way there are certainly parallels to the work that we are already doing.

Gilder was also optimistic about blockchain technology, noting that almost all banks have set up a digital asset team, a sign that banks recognize the need to understand the space, she said.

Digital asset lawyer Michael Bacina of Piper Alderman and chairman of Blockchain Australia, who also moderated the session, hopes for closer collaboration between banks and industry to tackle the problem of scams together.

“Banks have come up with numbers about scams involving crypto as a means of payment of some sort.”

“It is important to understand this data in more detail, but what is clear is that businesses in the blockchain and crypto industry need to work together with banks and payment providers to ensure that scams are reduced as much as possible,” he added.

The banks’ decision continued to face criticism from the crypto exchange’s Australian customers. Australian lawyer and senior researcher at the RMIT Blockchain Innovation Hub, Aaron Lane, however, defended the banks’ actions.

Banks and other financial institutions are under increasing pressure to tackle the growing problem of scams involving cryptocurrency. Imposing time limits, refusing transactions and placing deposit limits are all mechanisms that allow banks to regain control and limit their legal and regulatory risks.

While these measures may not be ideal for Australia-based crypto exchanges and their clients, Lane said a risk-based approach is better than outright unbanking.

Related: Australians Revealed as Top Targets of Israeli Crypto Scam Syndicate

According to the Australian Competition and Consumer Commission, Australians lost A$221.3 million ($148.3 million) to investment scams where crypto was used as a form of payment in 2022, a massive increase of 162.4% compared to 2021.

Power concluded that crypto remains a significant vector for scams in Australia, calling on banks and the government to clamp down on the sector.

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