CBA targets the young with ‘monumental’ move into cryptocurrencies

Commonwealth Bank has played down lingering concerns about the risks associated with digital currencies to the local money laundering compliance regime, as it increases its appeal to younger Australians by allowing customers to trade cryptocurrencies.

In a first for an Australian bank, CBA on Wednesday said it would allow its customers to trade in up to 10 cryptocurrencies including bitcoin through its app, citing a surge in demand from younger clients.

CBA will allow customers to invest in up to 10 crypto assets including Bitcoin, Ethereum, Bitcoin Cash and Litecoin.Credit: AP

The move comes as CBA is locked in a fierce battle for young clients with fintech rivals such as Afterpay, and as regulators grapple with how to handle the risks and potential opportunities created by the global cryptocurrency craze.

One of the top risks cited by regulators and other banks is the potential for cryptocurrencies to be used for money laundering, but CBA chief executive Matt Comyn said the bank had engaged with the financial crimes watchdog, Austrac, on its plans.

Mr Comyn said the pilot program, to be launched in coming weeks, would not allow customers to exchange cryptocurrencies with “wallets” from other crypto exchanges, which meant the bank could vet the customers it dealt with.

“We’ve deliberately tried to design a low-risk pilot and offering,” he said.

Jefferies analyst Brian Johnson said the crypto foray was a smart move by CBA as it looks to win young customers who will one day take out mortgages and other lucrative products. While it would produce “negligible” revenue for CBA, he said offering the service could act as a “gateway drug” in moving customers onto CommSec’s Pocket investing app.

“To the extent it’s something that appeals to the youth market, it locks them into the bank’s app,” he said.

Evans and Partners analyst Matthew Wilson said CBA’s move was largely symbolic, and a sign of how banks were being forced to change in a bid to appeal to young people who were more likely to use fintechs. “It doesn’t move the dial, but it shows you the pressures facing the major banks. They’ve become irrelevant for a young person,” Mr Wilson said.

Supporters of the cryptocurrency sector, meanwhile, hailed CBA’s decision as a powerful sign that crypto assets are becoming more mainstream. CBA says 8 per cent of the Australian population has invested in the asset class, and more than 500,000 of its customers have transferred money to crypto exchanges in the last two years.

Simon Cant, managing partner at Westpac-linked venture capital fund Reinventure, said it was inevitable banks would be forced to deal with cryptocurrencies given their potential to disrupt the industry.

“I think it will create pressure for all the banks to think about how they approach this asset class,” he said. “I think it’s monumental.”

Liberal Senator Andrew Bragg, who has called crypto assets to be regulated, said: “For too long, banks have cast aside cryptocurrency as an illegitimate fringe pursuit. I am pleased the tide is turning, as digital assets are mainstreamed.”

CBA CEO Matt Comyn said there was growing customer demand for cryptocurrency assets.Credit:

None of the other big four banks expressed a firm position on cryptocurrencies on Wednesday, but some CEOs of rival banks to CBA have previously expressed scepticism about the asset class.

Aside from the money laundering risks, regulators have also raised concerns about the high volatility of cryptocurrencies, the risk of scams, and the huge amount of electricity used by the industry.

Mr Comyn acknowledged the high volatility in crypto assets, but said trades were typically in the hundreds of dollars, and the risks would be made clear to customers who sought to buy crypto assets through its app.

“Of course investing in cryptocurrencies comes with risks. We make it very clear to customers as part of that process, that you should only be investing what you’re prepared to lose,” he said.

Amid debate about whether cryptocurrencies are speculative assets or “money”, Mr Comyn said the topic was divisive among banks, but he believed the asset class was here to stay.

“The category itself is polarising people entirely,” Mr Comyn said in a media briefing. “Some [banks] are going down the path like we are - a smaller number probably - running some experiments. Others are sort of hoping that regulators will regulate the industry out of existence. Our view is that’s probably unlikely.”

The bank is making security a key selling point in its crypto plan, and will use United States firm Gemini to provide the exchange and custody services. CBA will allow customers to invest in up to 10 crypto assets including bitcoin, ethereum, bitcoin cash and litecoin.

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