Bitcoin flounders in Australia as regulatory worries bite


* Australian banks closed accounts of 13 bitcoin exchanges

* Businesses wary of currency’s potential crime links

* Australia estimated to hold 7 percent of bitcoin’s global
value

By Byron Kaye and Swati Pandey

SYDNEY, Oct 4 (Reuters) – Australian businesses are turning
their backs on bitcoin, as signs grow that the cryptocurrency’s
mainstream appeal is fading.

Concerns about bitcoin’s potential crime links mean many
businesses have stopped accepting it, a trend accelerated by
Australian banks’ move last month to close the accounts of 13 of
the country’s 17 bitcoin exchanges.

The development is a blow to hopes of bitcoin fans that the
currency can play a significant role in everyday business
transactions in developed economies, with Australia once seen as
one of its most promising markets. It is estimated to hold 7
percent of the currency’s $3.5 billion global value, a sizeable
figure in a country of just 24 million people.

“We’ve got a squeaky clean reputation, and that’s actually
worth a lot more to us than dipping into this,” said James
Snodgrass, principal of Sydney’s Forsyth Real Estate, which
ditched the currency in late 2014 after the firm was
investigated by the federal tax office.

Forsyth had offered to collect home deposits and other
realtor fees via bitcoin to cater to international buyers. The
tax office probe found no wrongdoing but Forsyth was burned by
the negative publicity and bailed out before ever taking a
bitcoin payment.

Although most mainstream banks in Europe and the U.S.
already refuse to keep bitcoin-affiliated accounts, developments
in Australia represent the first coordinated shutdown of bitcoin
exchanges by a country’s banking system.

The move makes it much harder for people to convert regular
currencies in to or out of bitcoin, threatening its long-term
value.

“It really runs on people using bitcoin, and if nobody uses
it then it’s worthless,” said University of Technology Sydney
senior finance lecturer Adrian Lee.

BANK SHUTDOWN

The banks’ shutdown appears at odds with a government
inquiry which in August recommended removing sales tax for
people who buy bitcoin. The Australian anti-money laundering
agency, AUSTRAC, told Reuters that banks have no legal
obligation to close bitcoin accounts.

The so-called “Big Four” banks – Commonwealth Bank of
Australia, Westpac Banking Corp, Australia and
New Zealand Banking Group and National Australia Bank
– directed inquiries about bitcoin to the Australian
Bankers’ Association.

Tony Pearson, the association’s acting chief executive,
wouldn’t confirm the coordinated rejection of bitcoin but said
in an email that its “lack of transparency and regulatory
oversight raises a number of risks for users and also poses
risks for the payments system, the integrity of the financial
system and the erosion of the tax base”.

Australia’s organised crime agency has said it is concerned
the currency’s untraceable nature makes it attractive for money
laundering and selling illicit drugs.

In the U.K. and the U.S., most large banks have already cut
ties with bitcoin account holders, but lack of industry
co-ordination has left room for individual lenders to support
the currency, including Germany’s Fidor Bank AG, which
operates in Britain, and tech-focused Californian lender Silicon
Valley Bank.

CLOSE, MOVE OFFSHORE OR SNEAK AROUND

The 13 Australian bitcoin exchanges whose accounts were
closed by the banks have shut operations.

The remaining four have had their accounts frozen, and now
face three options: close, move overseas or spread their
business into several smaller bank accounts to avoid detection
by their banks.

Buyabitcoin.com.au, one of the remaining four exchanges,
said it is still considering its options.

“It makes it, obviously, hard to take payments from our
customers, but we have a couple of relationships left,” said
Andrew Smith, general manager of the Melbourne-based exchange.

Smith declined to identify which bank his firm is now using
from fear of repercussions but said he plans to move the
business offshore.

Two sources told Reuters that regional lender Bank of
Queensland still held some bitcoin accounts. The bank
said in an email that “virtual currencies fall outside of our
risk appetite” but did not deny or confirm it had these
accounts.

RETAIL PULLOUT

Some industry watchers believe ambivalence may be bitcoin’s
biggest problem.

At least six Australian retail businesses, which as recently
as 2014 courted publicity for offering sales by bitcoin, told
Reuters they were considering exiting the currency.

“If governments begin to aggressively attack the whole idea
of cryptocurrencies and give it a bad name, it might have an
adverse effect on our brand by accepting it,” said David Brim,
co-founder of off-road vehicle maker Tomcar Australia, which has
sold one car using bitcoin since introducing it in November
2014.

Grant Fairweather, owner of the Metropolitan Hotel in
Sydney, said he started accepting bitcoin when a group of
digital currency fans chose his pub as their regular meeting
venue.

“They tell me that it’s doing quite well, but that doesn’t
transpose into here,” said Fairweather, who sells about A$100
($70) worth of drinks via bitcoin from the meetings and does no
other bitcoin trade.

An online clothing retailer told Reuters she had made no
bitcoin sales since introducing the service in 2013 and asked
not to be named, saying “since bitcoin’s going out anyway, we’d
rather not throw our name back into it”.

(Additional reporting by Nathan Lynch in SYDNEY and Jemima
Kelly in LONDON. Editing by Jane Wardell and Rachel Armstrong)

TheBitcoinNews.com – leading Bitcoin News source since 2012