You no longer bank here
… and just like that. The largest digital currency exchange in the country lost its banking facilities.
The decision is no doubt related to perceptions on KYC undertaken by Binance. I have to say though, having used that platform, it’s at least as rigorous as anything you encounter at a traditional bank. Binance has been convicted of no crime in Australia (or anywhere). Their crime is really that they grew too quickly. The jealous eyes at our big four banks would not have enjoyed their inability to participate in a new industry and they are well on their way to killing it off in Australia.
Shall we pause for a reminder?
In November 2019, Austrac launched federal court action accusing Westpac of breaching AML-CTF laws more than 23m times, including by allowing a dozen customers to transfer money to the Philippines in a way consistent with child exploitation.
But in a statement of agreed facts, to be filed with the court, Westpac said that in December last year it “completed a review of all child exploitation transaction types for the Philippines, south-east Asia and Mexico over the prior three year period”.
As a result, it discovered an additional 248 customers who had been making payments in a way consistent with child exploitation, and reported them to Austrac.
In addition, Westpac said it had been banking two customers convicted of child exploitation offences who made suspicious transactions.
“Had Westpac conducted appropriate ongoing customer due diligence with respect to customers 261 and 262, these child exploitation related suspicions could have been identified earlier,” the bank said in the statement of agreed facts.
23 million breaches. The euphemistic ‘child exploitation’ is used, one imagines, because the journalist involved couldn’t bring themselves to actually write down what an Australian bank had (unintentionally) facilitated. Neither can I. The CEO and the Chairman resigned, but only after they did the rounds with shareholders to test the water. ‘We haven’t done anything wrong’ they explained, which as individuals was no doubt true, but the feedback from shareholders was pretty clear. They didn’t make it past lunchtime.
Did Westpac lose their banking license? No. Did they even lose their bank account? No. Is there any crime an Australian bank could commit that would result in them losing their ability to operate? No. We know that because they were complicit in what most communities consider the worst crime of all and all they got was a fine.
Banking licenses are an outrageous privilege; increasingly used as weapons against competitor businesses on the grounds of KYC. Unfortunately the weaponisation of banking and currency will only grow. It first happened at the state level with the Americans turning off SWIFT for enemy nations. They stepped it up with their seizure of Russian USD reserves, a strategic blunder that will seal the fate of the USD. Further down the food chain we see it used against individuals and out-of-vogue businesses. What will happen when we get Central Bank Digital Currencies? This de-banking will take place at the individual transaction level.
For now, nobody cares about Binance. They are just another exchange amongst many and it’s no big deal. Those of you thinking a bit more broadly though might wonder how it came to be that a legitimate business, that employs people, pays tax and provides a service people want can simply be excluded from the economy altogether at the stroke of a pen.
Australia is a free country, but only if you don’t look too hard.
A clever thing to say
“The CHESS replacement system is the biggest technology project ASX has ever undertaken. It’s a one-in-25-year event. We are completely re-platforming the equity market’s post-trade services using distributed ledger technology.”
Then they spent $250m dollars attempting to do so. Now they have given up.
This particular project is the poster child of “I don’t like bitcoin but love the underlying technology ‘blockchain’”. Those words, which continue to be uttered by business leaders, sound good but reveal nothing but a complete misunderstanding of how the technology works.
Blockchains are awful. They are slow, wildly expensive to run, and you would only ever use one if you wanted a bulletproof, internationally distributed network of trust that you couldn’t control or change. Those final words are the point. By definition, if you actually want to use a blockchain you do not control it. Why on earth would a heavily regulated business like the ASX want to give up control of the CHESS system? They never did, they simply wanted an ‘internal blockchain’. The concept itself is an oxymoron; you cannot have an internally controlled system and declare you are operating a decentralised blockchain. It was obvious from the start.
What the ASX really needed was the very latest SQL Database. The reason Larry Ellison is one of the richest men in the world is because his databases are absolutely incredible. They are resilient, well supported, widely used and understood, and almost never fail. All banks use them, all stock exchanges use them and the ASX uses them. Now, minus $250m dollars, they will continue to use them.
If you are in business and considering ‘blockchain’ you need to ask why. Are you actually seeking to give up control of your business and your database or do you really want to build a decentralised global network of trust that you will have no influence over? The answer is almost certainly no.
A database, you need a database.
Aside from anything else, the extreme difficulty any private entity has had in implementing their so-called blockchain goes to show just how hard this is. Should it be that you come across such a system in the wild, perhaps one that was constructed for a total cost of zero; you might want to consider its features very closely and participate. They are rare and probably singular opportunities.
We dodged a bullet this week thanks to the US debt ceiling. Joe Biden’s autocue had been scheduled to address the Australian Parliament but now he had to get back to Washington.
Joe has been at the G7 in Hiroshima. The most exclusive club of all. Only the richest nations get a seat at this table (Canada, Japan, the United Kingdom, France, Germany and Italy). Sadly for them, the world discovered earlier this year that the BRICS now have greater GDP than the G7. Surprised? Brazil, India, China, Russia and South Africa. They also have birth rates roughly double the G7 and growth rates even higher than that, so there’s no way back for our friendly cabal of 7. The gap will widen quickly.
Anyway, they kept on pretending and here they all are in the official ‘Family Photo’. All nine of them. On the wings are The president of the European Council, Charles Michel (far left) and European Commission president, Ursula von der Leyen (far right – literally) both pretending to represent someone.
The reason Biden must hurry home is that debt discussions aren’t going so well and he has devised a plan to avoid disaster. The 14th amendment of the US constitution says the following:
“the validity of the public debt, authorized by law … shall not be questioned”
The theory here is that he will ignore the approval of Congress because the constitution says he can.
Seems tenuous to me, and nearly everybody else, but a large group of his own party are calling on the President to use it to avoid being held hostage on the issue. The obvious question is surely someone would have thought of this before? The 14th amendment passed in 1868 so it’s not like constitutional scholars haven’t had time to think about it. “Authorized by law” might be the sticking point. Congress makes them not El-Presidento; so I give it zero chance of happening, but you never know.
If it does, it will be used continually and the whole debt ceiling drama will go away and the US government will be able to spend whatever it likes. A bit like now really.
For your protection, Canada released new rules for cryptocurrencies earlier this year. The “investor protections” prohibit leveraged trading, futures and also mandate a $30,000 buy limit on non-core cryptocurrencies.
The rules are long, and onerous. Pretty much every meaningful exchange in the country left. Binance, OKX and Paxos have all since closed their doors to Canadian customers. The Paxos announcement mirrored the others.
Something’s up in Canada; the birth rate is way off too. 1.4 is disaster level.
I’m not suggesting that making life hard for cryptocurrency exchanges is related to the birth rate. I am suggesting that letting people get on with their lives in a way of their choosing probably helps it though. I can think of no better confidence indicator for a country than the willingness of its people to have children.
In their infinite wisdom, the ECB commissioned a report on whether leaks from the ECB are valuable or not. They identified 368 such instances, which is a mind boggling number and makes you wonder how many there really are.
Incredibly, leaks from the ECB actually move the market more than official statements. It would seem obvious to me why this is; because official statements have already been leaked and the market moves before the statement comes out. This level of insider trading would make Steven Cohen blush and nowhere in the report do we hear of any action being taken against leakers.
The EU report concludes that it’s all meaningless anyway, delivering this nonsense.
“The analysis also shows that leaks are likely to reflect minority views. They often reverse earlier market trends in short-term rates, i.e. go against the policy line perceived by the public. But looking back after the decision is made, preceding leaks usually did not move market rates closer to the actual policy outcome.”
It completely misses the point; if the leak moves the market then the leaker is already positioned. Makes some money, closes the position and heads straight to the Kronenhalle (highly recommended; make sure you book), while the market corrects.
It’s unbelievable that this report hasn’t been taken up more widely. It’s an admission of widespread corruption at the ECB, which is excused on the basis that the leaked information has limited predictive power. Quite how the leadership of the bank lets this slide without taking action is beyond me.
Here’s a totally unrelated picture and article from 2016. Enjoy the weekend.