The Commonwealth bank announced last week that it plans to allow users of its CommBank app to trade cryptocurrencies, the first of Australia's big four banks to do so.
Cryptocurrencies are known for their wildly unpredictable price fluctuations, damage to the environment, and use by criminals to try to disguise illegal activities, such as money laundering.
Multiple countries, including porcelain, Turkey and Vietnam have banned or restricted the use of cryptocurrencies in their jurisdictions.
So why is CBA doing this?
Based on account data, CBA believes that around 500,000 of its clients are already engaged in crypto trading.
CBA CEO Matt Comyn said in a statement: "We believe we can play an important role in cryptocurrencies to address what is clearly a growing need from customers and provide capacity, security and confidence in a trading platform of cryptocurrencies ".
In a few weeks, the bank will invite 2,000 clients to join a pilot program where they will be able to buy, hold and sell cryptocurrencies through the CBA phone app.
The bank will initially offer 10 of the most popular currencies, including bitcoin. (Will not include parody converted to $ 35 billion market cap dogecoin).
What users will not be able to do is transfer cryptocurrencies to other people; All transactions will involve buying or selling the coins for real money. This is because the crypto transfer is difficult to trace, which makes it attractive to criminals and a nightmare for the bank when it comes to complying with anti-money laundering and anti-terrorism finance laws, something that banks find hard enough with regular money transfers.
Instead, all movements in and out of cryptocurrencies will be carried out through the client's own accounts, allowing the bank to better keep track of what is happening.
What are the environmental problems?
Cryptocurrencies are generally created by computers that solve difficult mathematical problems, a process called "mining" that uses a lot of electricity.
Bitcoin mining currently only uses more electricity than Argentina, most of which comes from fossil fuels, and is on its way to using more than Australia.
Burning fossil fuels to produce electricity is a major source of global warming.
Aren't cryptocurrencies unstable?
Yes, the price of bitcoin, for example, can be halved or doubled in the space of one or two months.
This volatility is one of the reasons why it is not suitable for use as a real world currency.
The transactions are also very slow and the transaction fees are very high. Rates fluctuate a lot but are currently a little more than 1% of the value of the transaction.
This may not sound like much, as it is almost the same as being charged for using a credit card at a store. But when you use a card, the bank is lending you money.
In contrast, transferring your own money between two Australian bank accounts is free, as is using eftpos.
Bitcoin payments are also much, much slower than the near-instantaneous transactions available through credit cards and eftpos.
Even traditional transfers between accounts are becoming much faster thanks to what is called the New Payment Platform, a system that all banks are implementing and under which all transfers take less than a minute.
Bitcoin transactions currently take more than six minutes to be confirmed. In July, it was closer to 20 minutes, too long to spend for retail transactions. At that speed, no one is going to use bitcoin to buy expensive pizza because it will have cooled and soaked before the transaction is settled.
Some of the other cryptocurrencies that CBA plans to offer aren't much better. The average "gas fee" (transaction cost) of an Ethereum transaction is between US $ 85-156, according to crypto.com data. This is fine for large transactions, but not very useful for small transactions.
Much of the enthusiasm for cryptocurrencies as a real currency comes from the United States, where the banking technology infrastructure is poor by the standards of the developed world. They still regularly use paper checks, for example, which have largely been abandoned in Australia.
What are cryptocurrencies used for?
Due to these problems, there are few legitimate uses for coins as currency. Most people who buy cryptocurrencies do so to speculate on its value.
However, since it is difficult to trace, crypto is the preferred payment method demanded by the ransomware gangs holding organizations' data hostage.
That also makes it good for buying and selling illegal goods and services, such as drugs and even, according to some reports, murder for hire.
People accused of unrelated crimes often tend to have bitcoins on hand when authorities attack; In several recent cases, the Australian Securities and Investments Commission has requested freezing orders on large holdings of bitcoins in the possession of the defendants.
Its main uses appear to be investment scams and money laundering.
Money launderers are prepared to take a little volatility risk to clean up dirty cash and pay high fees along the way. Despite the occasional sudden drop, crypto in general is a rising market, so there is even a chance to make money while it washes up.
Many of the crypto exchanges currently operating in the offshore world, mostly unregulated, have suffered attacks that have led to clients losing some or all of their money.
What are regulators doing about it?
US regulators have been intensifying their scrutiny of the sector. Last month, the Commodity Futures Trading Commission loaded the owners of the Bitmex trading platform operating an unregistered trading platform and other violations, including failure to implement the required anti-money laundering procedures.
There is also great concern among regulators about so-called "stablecoins", the value of which is supposed to be pegged to real world currencies like the US dollar or the euro.
Central banks around the world have become increasingly alarmed by the threat posed by stablecoins. In a joint document last month, the Bank for International Settlements, which is the central bank of central banks, warned that they pose a number of risks that would increase if any of them managed to achieve global scale.
In the past, a stablecoin issuer, Tether, claimed that its coin was 100% backed by US dollars; however, this was not true and as a result, last month the CTFC fined Tether and a related exchange operator iFinex, totaling $ 42.5 million.
How does Australia regulate it?
Australia has been slow to regulate cryptocurrencies. The Australian Securities and Investments Commission does not have any regulatory oversight of most currencies because they do not meet its definition of value.
However, the threat to consumers from crypto scams is a priority area this year, for the first time.
And last week, Asic updated its information sheet for crypto assets, warning currency dealers that a number of Australian laws could apply to them.
Meanwhile, a parliamentary investigation led by liberal Senator Andrew Bragg has proposed that the cryptocurrency sector be subject to a lighter regulatory regime than normal financial products.
In a report published last month, Bragg's research recommended changes that include giving cryptocurrencies a tax break to encourage growth here.
