Access to banking has gotten so limited in the UK over the past few weeks that crypto companies had to complain directly to Prime Minister Rishi Sunak’s government.
Per Simon Jennings, executive director at the advocacy group the UK CryptoAsset Business Council,
“When crypto started, the purists were saying crypto will bring down the banks. But ironically, it’s the banks that could bring down crypto.”
According to Bloomberg, citing “two people who were present” at a March 8 meeting at the Treasury with Economic Secretary Andrew Griffith, crypto executives brought up the banking access issues, with Griffith responding that he would try to resolve the problem with lenders.
A Treasury spokesperson did not comment on the meeting, but they told Bloomberg that the government would continue to discuss “emerging issues” with stakeholders as its consultation progresses.
The meeting was part of the Treasury’s dialogue with digital asset industry representatives after it proposed a set of new rules for the sector in February of this year.
Not many options for crypto firms
The UK government is encouraging crypto entrepreneurs to expand in the country, but this has turned out to be a very difficult task due to the cold reception they’ve been receiving from lenders.
The lender’s cautious approach is generally presumed to be the result of the series of legal and regulatory challenges hitting the industry, mostly following the falls of a number of crypto companies, as well as several accompanying scandals.
However, Jeff Hancock, co-founder and chief executive of London-based crypto exchange Coinpass, was quoted as saying that,
The lack of access to banking “hampers any effort to make the UK a crypto hub, which is what Rishi and the government say they want.”
As reported, over the past couple of months alone, major banks including HSBC Holdings and NatWest Group have (additionally) restricted the amount of money that UK customers can move to crypto exchanges.
And now, the reports are claiming that the issue is deepened by a number of major difficulties. Per Bloomberg, citing “a dozen UK crypto executives” it interviewed, the problems crypto companies have been facing include mountains of paperwork and rejected applications.
SavingBlocks, a company that offers a suite of digital asset portfolios for passive investors, told the news outlet that it applied with nine different banking service providers for a corporate account – and was turned down by seven of these.
The remaining two have requested additional documentation, including a detailed description of the processes the firm uses to screen clients’ transactions.
The company’s CEO, Edouard Daunizeau, stated that,
“There aren’t many options available – most traditional banks won’t offer banking services to crypto firms. With the recent string of events it will be even tougher.”
It’s gotten so bad that SavingBlocks decided to seek licenses in France where the CEO argued the process might be easier.
Fears of getting locked out
Tom Duff-Gordon, vice president of international policy at Coinbase Global, was quoted as saying that the UK banking reaction “has been more acute than the EU one.” The potential reason may be the latter’s progress in establishing its framework for crypto regulation, with the much-anticipated Markets in Cryptoassets (MiCA) regulation set for a final vote this month.
Joe David, the co-founder of accounting and professional services firm Nephos Group, said that the company’s account with money transfer platform Wise was locked for more than three months starting in November last year.
Wise initially just said that Nephos breached the terms and conditions, but upon further requests for specific information, Wise referred David to the user terms section detailing its policy on cryptoassets.
Due to this situation, until the account was finally unblocked, Nephos had to use subsidiaries to make payments. The company now has accounts with two other providers “just to make sure if we did get locked out we can still have activity,” said David, and added:
“If you haven’t got a bank account, you can’t pay anyone.”
There are other events that further show the tightening rope around the crypto sector in the country.
Some crypto companies, like the above-mentioned Coinpass, use payment-service providers like Paysafe Financial Services, which operate under the UK’s money-licensing regime, allowing them to offer basic services to crypto companies.
And yet, in mid-March, Paysafe said that it would cut off support for transactions carried out in GBP to UK customers of crypto exchange Binance, forcing the exchange to halt deposit and withdrawal services through bank transfers and card payments to these users.
“We have concluded that the UK regulatory environment in relation to crypto is too challenging to offer this service at this time and so this is a prudent decision on our part taken in an abundance of caution,” Paysafe said at the time.
Meanwhile, Bloomberg noted that “by at least one metric” the UK is “quickly losing ground to the rest of Europe” when it comes to the crypto industry progress. According to data from PitchBook, venture capital investment flowing into UK digital asset companies dropped 94% from a year earlier to $55 million in the first quarter. This compares with a come 31% increase for the rest of Europe, it found.
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Learn more:
– Regulator Warnings Prompt HSBC and Nationwide Banks to Limit Crypto Transactions
– HSBC Acquires Silicon Valley Bank UK for £1 to Safeguard Customers and Taxpayers – What’s Going On?
– UK to Ramp Up Crypto Oversight: Tax Forms to Include Separate Reporting for Crypto Assets – More Regulation Incoming?
– Boris Johnson’s Brother Quits Binance Unit Advisory Role Amid ‘Finance Transparency Concerns’ and Market Turmoil – Here’s What Happened
– European Parliament Passes Historic Anti-Money Laundering Rules for Crypto Industry – More Regulation Incoming?
– How to buy and sell Ethereum in the UK?
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