Great articles on other sites
- iiNet founder Michael Malone finally backs TPG Telecom takeover
- How and why the public sector must make friends with artificial intelligence
- Second anniversary of IT pricing report approaches - Computerworld
- Doctors spend 15 mins opening Fiona Stanley Hospital software
- What to expect from Abbott's national cyber security strategy
- ISPs need more time for data retention compliance
- TPG iiNet bid: major shareholders complain
- Qld emergency services payroll replacement on the rocks
- Victoria to wait another eight months for public IT dashboard
- Superloop CEO slams Australian govt tech policies
Renai's other site: Sci-fi + fantasy book news and reviews
- Kim Stanley Robinson’s new book Aurora is due in July
- What’s the future of “Grimdark” fantasy?
- An epic rant from Richard Morgan about nuance in writing
- Brandon Sanderson’s Firefight: Review
- Get into Jeff VanderMeer’s head as he writes the Southern Reach trilogy
- George R. R. Martin’s next book The Winds of Winter won’t arrive in 2015
- Alastair Reynolds’ Poseidon’s Wake launches 16 April
- Ann Leckie’s Ancillary Sword: Review
- Ann Leckie finishes Ancillary Mercy
- Hannu Rajaniemi’s The Fractal Prince: Review
Analysis, Digital Rights - Written by External Contributor on Monday, April 14, 2014 9:40 - 9 Comments
NAB’s Bitcoin ban a symptom of the digital currency threat
analysis Virtual currency Bitcoin is not a subject that ever draws neutral reactions. Against those who see the radical possibilities of a frictionless payment system designed for the internet, there is a growing resistance to the currencies that threaten existing business models and the perceived traceability of our current currency systems.
Leading the resistance against digital currencies are the banks, with the latest recruit to these ranks, Australian bank NAB, closing accounts of customers whose businesses are engaged in exchanging cryptocurrencies.
An Australian trader operating through LocalBitcoins.com and an another Australian Bitcoin exchange CoinJar have received letters from NAB informing them that: “… digital currency providers pose an unacceptable level of risk, both to our business and reputation.”
NAB joins banks in China such as the Agricultural Bank of China, that has moved to freeze the accounts of one of China’s larger Bitcoin exchanges, BtcTrade. Likewise, banks in Canada have already largely blocked accounts used for companies trading cryptocurrencies.
It is easy to point to the recent failure of Bitcoin exchange Mt Gox and the subsequent law suits that have embroiled Japanese bank Mizhuo, as a catalyst for NAB’s move. But if banks refused to service businesses after one or more of their kind went bust, they would not be left with very many clients. The risk assessed was also not one based on the companies involved, their operations or their clients, it was simply a matter of the business they were in.
While moves by banks to manage risk is something most customers would welcome, the global financial crisis showed us banks’ views of risk are highly selective and largely determined by the other part of this equation: the rewards. In terms of cryptocurrencies, the rewards to banks at present are very low. This is especially the case for a currency that is designed to largely cut them out of the picture.
Bitcoin and other digital currencies are designed to be exchanged directly between senders and receivers. This means that currently, transaction costs and bank fees can be avoided, so banks’ enthusiasm for supporting this industry or promoting it would be tepid at best. The real risk to banks is perhaps then not that posed by customers using accounts to enable Bitcoin exchanges, but the threat to their bottom line.
NAB’s own senior currency analyst Emma Lawson has argued Bitcoin has many of the characteristics of regular currency, and that its potential to become a successful payment system it contingent on people’s continued belief in it. Clearly something that banks aren’t yet willing to see happen.
If banks are asked to justify their decisions purely on risk, they are likely to point to Bitcoin’s association with criminal activities. The rhetoric here has recently stepped up with the European police chief claiming we’re just seeing the beginning of Bitcoin’s use by criminal organisations.
Other than the clear use of Bitcoin as the payment system of illegal websites such as Silk Road), the use of cryptocurrencies as a proportion of the total value of money involved in crime is probably tiny. The United Nations Office on Drugs and Crime estimates that in 2009 the total amount of money involved in global criminal activity was US$2.1 trillion. The total market capitilisation of all cryptocurrencies is currently less than US$10 billion.
Cryptocurrencies may appear to be ideally suited to money laundering, but the problem is they eventually have to be exchanged for real currency, which immediately causes problems if you are trying to move large amounts of money. The second issue is the extremely volatile value of such currencies. There is a large risk that money with a certain value ends up being worth a lot less by the time it has been laundered and converted into a currency that can be actually put to some use.
Of the U$2.1 trillion that is involved annually in global criminal activity, most, if not all, will pass through banks at some point, and not surprisingly, will drive revenue for those banks. The idea then that digital currencies pose a larger theoretical threat seems somewhat absurd in comparison to the very real crime involving real currency.
Governments around the world have moved to deal with the lack of regulations on Bitcoin by either banning the currency outright, as in Thailand, or practising “masterly inactivity”, essentially delaying making any moves that might legitimise digital currencies and the industries that would then arise around them.
In this regulatory vacuum, banks have been able to protect themselves against the threat of the bankless payment system that digital currencies represent.
News, Policy + Politics - Jul 29, 2015 15:25 - 10 Comments
More In Policy + Politics
- Labor unveils strong Digital Economy push with top political support
- Back off: Optus, TPG tell Govt on Telstra pricing
- Unprecedented: Whole ICT sector combines to blockade TSSR bill
- Brandis “alarmed” over Labor’s data retention review
- Labor pledges Data Retention policy review
Analysis, Enterprise IT - Jul 28, 2015 16:20 - 11 Comments
More In Enterprise IT
- Qld Govt Depts have no disaster recovery plan
- ASD releases Windows 8 hardening guide
- ASG picks up $35m CIMIC IT services deal
- Datacom completes mammoth Health ICT takeover
- Weather bureau gets $80m Cray supercomputer
Industry, News - Jul 28, 2015 12:37 - 0 Comments
More In Industry
- iiNet shareholders vote ‘yes’ for TPG buyout
- iiNet chairman “proud” as TPG sell-out looms
- Kotaku alleges abuse, gross staff neglect at retailer EB Games
- Aussie software firm Marketplacer grabs $10m
- Expert360 pulls in $4.1m for consultancy 2.0
Consumer Tech, News - Jul 29, 2015 17:14 - 1 Comment
More In Consumer Tech
- Older Australians embracing video games
- Gasp … Qld will fuel electric vehicle charging stations with solar
- Oops … Tesla enthusiast charges car on Qld windfarm
- Netflix Australia: Review
- RAC builds electric vehicle highway in WA