Australia: Banks Asked to Report Crypto Exposure

Lavina Daryanani
Source: TechStory

The banking contagion that unfurled earlier this month, took the masses by surprise. Three renowned financial institutions collapsed like dominoes, making the U.S. its victim. Despite Credit Suisse’s plight, many—including Citigroup—feel Europe’s banks are safe and are unlikely to face an SVB 2.0 situation.

In fact, regulators around the world have started spelling out the situation of banks in their respective regions. Recently, Chris Kent, Assistant Governor of the Reserve Bank of Australia affirmed that Australian banks are “unquestionably strong.” In fact, the official also went on to underline that they have solid capital and liquidity buffers. However, as a precautionary measure, banks have allegedly been asked to report their exposure to crypto-focused ventures and start-ups.

Citing input from three anonymous sources, the Financial Review reported that the Australian Prudential Regulation Authority told banks to “improve their reporting around crypto assets and provide daily updates” to the agency. This step has been taken to get more insight into vulnerabilities present in the system.

Also Read: National Australia Bank to Launch Stablecoin on Ethereum Network, Algorand Blockchain

Will increased scrutiny hinder crypto’s growth?

Furthermore, the AFR reported that the major banks have “privately stressed” that the local crypto industry is “small and largely banked offshore” because of the apprehensions associated with anti-money laundering compliances. An APRA spokesperson, however, declined to comment but emphasized that the regulator had “increased supervision” of the banking sector. Nevertheless, one source told the AFR, that start-ups have started worrying about their apps offered via third parties. This is because the funds stored in digital wallets could reportedly be “frozen” if banking services were abruptly withdrawn. Furthermore, According to the AFR’s report,

Crypto players said that the increased scrutiny could lead banks to deem the sector riskier, meaning they would cite heavier risk weightings as an excuse not to service the sector. These start-ups fear this could make it harder to continue their banking relationships and operations like payroll.

Also Read: Australian Crypto Ownership has Declined: Is there a Silver Lining?