The Australian banking industry has decided to declare war on local Bitcoin companies by cutting their bank accounts off in what could be a fatal blow for the nascent industry in the country.

According to reports both the Westpac Banking Corporation (Westpac) and the Commonwealth Bank of Australia Ltd. (CBA) have sent letters of closure to 17 Australian Bitcoin companies, with 13 confirmed as having had their accounts closed.

Ron Tucker, chairman of industry body The Australian Digital Currency Commerce Association indicated to The Australian Financial Review that the closure of accounts went further than Westpac and CBA alone, and extended to other large Australian banks, presumably the two of Australia’s other big four banks, the Australia New Zealand Banking Group Ltd. (ANZ) and the National Australia Bank Ltd (NAB).

The why is not fully known, with Tucker telling the paper “Our members have been unable to obtain any formal clarification on the reasons for closure, except for references to policy or risk. Just what policies or risks these are have not been specified…”

“The industry is more than happy to talk to the banks about their concerns. However, neither the association nor its members have been given the opportunity.”

Weird

There’s no question that the move by Australian banks to withdraw services from Bitcoin companies in Australia puts the local industry at severe risk; Bitcoin may be an alternative to fiat currency but likewise startups still use that money for services where Bitcoin payments are not available, and even more so for those offering exchange services from fiat currency into Bitcoin and return.

But here’s where it gets a little weird: CBA and Westpac are both investing themselves in Bitcoin and Bitcoin-related technologies, with the former not only dealing with the Blockchain internally but also as a contributing member to the R3CEV global Blockchain group; with Westpac it’s even weirder again because the bank once known as the Bank of New South Wales is an investor, through its venture capital arm, in U.S. based Bitcoin exchange Coinbase, Inc.

To repeat, Westpac itself is an investor in Bitcoin companies.

The why

Although no official statement has been made by the banks about why they are withdrawing banking services from Bitcoin-related companies, it’s probably a reasonably educated guess to think that has something to do with compliance with AUSTRAC, that is the Australian Transaction Reports and Analysis Centre, in its enforcement of laws targeted at money laundering, major crime and tax evasion.

Although we’re not suggesting any of the Bitcoin companies targeted are engaged in any way in nefarious or otherwise illegal activities, there would unlikely be a Bitcoin exchange in particular that has not had someone trying to wash stolen or otherwise gained through illegal activity Bitcoin through it.

As part of the AUSTRAC compliance it’s up to the banks to guard against this with their customers, and hence, as hinted in the quote from Tucker above, the banks have so far only cited “policy and risk,” which leads back to AUSTRAC.

The move is a sad one for the Australian Bitcoin industry and will only force more offshore, just as the Australian Taxation’s Office ruling that Bitcoin transactions are subject to the 10 percent Goods and Services Tax (GST) did previously.

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