Today the Guardian reported that Commonwealth Bank Australia (CBA) had paused its cryptocurrency app “amid turmoil and uncertainty in the market.” However, Australia’s biggest bank ended its first pilot months ago, so the recent turmoil caused by the Terra stablecoin collapse was not the reason.
In November, CBA announced plans for its crypto pilot to offer them as an investment option to its customers. It partnered with the U.S.-based Gemini cryptocurrency exchange, founded by the Winkelvoss twins. The bank also invested in Gemini’s funding round the same month.
The Australian Financial Review (AFR) reported in early April that the bank had completed its initial pilot and was in negotiations with ASIC, the securities regulator, about the wording of disclosures as well as the target market and consumer protections. Before launching a second pilot, apart from ASIC, CBA is also discussing requirements with the Australian Taxation Office, transaction reporting service AUSTRAC and the Australian Competition and Consumer Commission.
CBA CEO Matt Comyn gave a press briefing this week about several other digital product launches and also discussed cryptocurrencies. He mentioned the Terra stablecoin collapse, comparing it to a bank run, and said that stricter global regulation is inevitable.
“Let’s face it, the events of the last week are going to accelerate this – they will be treated similarly to financial institutions,” Mr Comyn told The Australian Financial Review this week. “I do think increasingly [stablecoins] will be regulated like a financial product, a deposit product.”
“As events of the last week have reinforced, it is clearly a very volatile sector, but there remains an enormous amount of interest. Alongside that volatility and awareness of the scale, certainly globally, you can see there is a lot of interest from regulators thinking about the best way to regulate that.”
Stablecoin regulation has been on the radar of central banks and regulators for some time, with the BIS and IOSCO publishing a report on the topic for the G20 in October last year.
But what has gone unnoticed is the start of discussions about how to regulate cryptocurrency exchanges, such as Gemini. If regulators adopt ideas in one of the BIS’ latest reports, exchanges will be treated similarly to banks, including strong balance requirements.