By
Temitope Olatunji
April 16th, 2024
The LUNA crash wiped off as much as 15-25% of major cryptocurrencies in the market.
The Commonwealth Bank of Australia has reportedly paused the pilot test of its crypto trading and custodial services.
Back in November 2021, the bank became the first to support crypto in the country. The bank announced a partnership with Gemini and Chainalysis to facilitate crypto trading on its app. The phased rollout began with the possibility of trading Bitcoin, Ethereum and eight other cryptocurrencies. Expectations were that more would be added as the year progressed.
However, the bank has decided to take a breather after the LUNA crash caused a market downturn. The crash wiped off as much as 15-25% of major cryptocurrencies in the market. Interestingly, the bank refrained from giving a timeline for the resumption of the test. According to the report, the bank noted, “Our intention still, at this stage is to restart the pilot, but there is still a couple of things that we want to work through on the regulatory front”
Commonwealth Bank Aiming for Regulatory Compliance
Citing the events around the LUNA crash, CEO of the Commonwealth Bank of Australia, Matt Comyn noted the crash reinforced the volatility of the cryptocurrency sector. Despite the volatility, he noted the industry was attracting global interest from people and regulators alike.
In Australia, the Federal Government announced plans for a robust regulatory framework in December. The Federal Treasury is also holding consultations about the next steps regarding licensing crypto exchanges. Comyn stated that the bank was taking a step back to work on regulations.
“We want to continue to play a leading role in providing input into that and shaping the most appropriate regulatory outcome,” he concluded.
Cautionary Approach to Prevent Reputational Damage
Dr. Dimitrios Salampasis, a lecturer at Swinburne University, has stated that the bank is just trying to limit damage to its reputation because it previously embraced cryptocurrencies. Salampasis further asserted that the bank’s move was for brand equity, risk balancing, and regulatory clarity.
He expressed his belief that the bank will continue working on cryptocurrencies in the background to retain its first-mover advantage. The idea, he said, is “to minimize disruption in CBA’s current business model.”