Australian multinational bank Westpac announced Tuesday that it had banned its customers from transferring money to the largest crypto exchange Binance as part of a phased trial.
Westpac made the decision after its data showed investment scams represented about half of fraud losses and a third of all the total losses were transferred to various crypto exchanges.
The banking firm did not specifically mention Binance, but the exchange announced the same day that it could not accept PayID payments in Australian dollars “due to a decision made by our third-party payment provider.” It also said it is seeking an alternative provider to continue offering Aussie deposits and withdrawals to its customer base.
Fellow Binancians,
— Binance Australia (@Binance_AUS) May 18, 2023
We regret to inform you that with immediate effect we are unable to facilitate PayID AUD deposits for Binance users due to a decision made by our third party payment service provider. We understand from our third party payment service provider that Bank…
Westpac chief operating officer Scott Collary said the action could save millions lost to fraud, noting that digital exchanges had “a legitimate role to play in the financial ecosystem,” but the rise of digital assets led to increased use of overseas exchanges.
“Often our customers only discover they’ve been scammed after the money has left the country, making recovery extremely difficult.”
Scott Collary, Chief Operating Officer at Westpac
The Australian Competition and Consumer Commission’s (ACC) Scamwatch reported last month that investment scams ranked as the top fraud category reported to the country’s financial authorities, amounting to $1.5 billion. In April, there were more than 500,000 scam reports with losses of more than $3.1 billion.
Bank transfer was the most popular payment method in these scams, with 13,098 reports totaling a $210.4 million loss. ACCC’s report also showed that 3,910 fraud victims use crypto as the payment method, a 162.4 percent year-over-year increase.
Several Australian-based crypto exchanges have assured customers that Binance’s inability to service Australian dollar payments is not an industry-wide issue. Independent Reserve CEO Adrian Przelozny said his exchange can still accommodate deposits and withdrawals in the Australian currency.
BTC Markets CEO Caroline Bowler also said her platform had “no due for concern,” adding that it works closely with payment providers to monitor fraudulent transactions.
Kraken Australia managing director Jonathon Miller pointed out that there were “only a couple” of crypto-friendly payment providers in Australia, and his exchange formed a strong relationship with these partners. Miller said that it was “very unfortunate” from a business perspective to block clients’ access suddenly.
These executives also noted a sudden increase in downloads and registrations to their exchanges as Australian crypto investors look for alternatives to Binance.
The news came a month after the Australian Securities and Investments Commission revoked Binance’s financial service license to sell derivatives in the country. The finance body found that the exchange had incorrectly classified hundreds of retail clients as wholesale investors. Binance later announced the shutdown of the Binance Australia Derivatives business.
Binance’s woes in U.S.
The U.S. Commodity Futures Trading Commission (CFTC) filed a civil enforcement action against Binance and its global CEO Changpeng Zhao for alleged “wilful evasion” of U.S. laws in March. According to the CFTC, Binance has grown its U.S. business even though the exchange claims it intends to block American customers from trading on the platform.
The complaint also alleged that Binance had violated the regulation by offering commodity derivatives transactions to American customers since July 2019 despite not being licensed by the CFTC. Binance operates in the U.S. as Binance.US, a separate entity from the global company.
Following the CFTC lawsuit, investors pulled out $1.6 billion from Binance. While the figure is substantial, analysts noted that the deposit outflows were not as high as on December 13, 2022, when investors cumulatively withdrew $3 billion from the exchange due to concerns about its liquidity.