Late last month, the ACCC reportedly confirmed that it will be investigating whether some of Australia’s largest banks have been involved in anti-competitive conduct by closing down the accounts of Bitcoin businesses and individual traders.
At least 17 Australian Bitcoin traders and companies were advised that their accounts would be closed with many concerned that they were not given an explanation for the closure. Banks involved include Commonwealth Bank, Westpac, ANZ and the National Australia Bank.
Queensland Nationals Senator Matthew Canavan (previously a member of a senate committee reviewing Bitcoin and other cryptocurrencies) is reported to have sent a letter requesting the ACCC to investigate the bank account closures. He is reported to have said that the actions of the banks “raise legitimate concerns about the degree to which collusive behaviour on the part of the dominant industry players was present.”
What is Bitcoin?
Bitcoin, first launched in 2009, is a network which facilitates a payment system of digital money. The system is powered by its users and does not have a central monetary authority or middleman. Consumers open a Bitcoin account, purchase Bitcoins using cash and then make transactions. Bitcoins are mathematically generated and the total number of Bitcoins that can be generated, or “mined” is limited, meaning that multiple new Bitcoins cannot be issued with the result of devaluing the ones already in circulation.
Ultimately, Bitcoin is a banking system which does not need banks.
What do Bitcoin companies do?
Traditional currency can be used to buy and sell Bitcoins on numerous exchanges such as Bit Trade, one of the Australian companies issued with an account closure letter from banks. Companies such as Buyabitcoin (which also received an account closure), provide a mechanism for the supply of Bitcoins to consumers. Other companies provide appropriate software for the direct transfer of Bitcoins from one user to another.
Competition with banks
While not necessarily large players at the moment, Bitcoin and digital currency operators are potential competitors to traditional banks. There have also been reports that Australian banks are themselves exploring potential benefits of the digital currency industry. In this context, questions have been raised as to whether the closure of their accounts may have been for an anti-competitive purpose or the result of some degree of coordination between banks, and could result in a reduction of future competition.