In 2022, Prime Minister Rishi Sunak announced plans to make the UK an international hub for crypto. Early this year, however, big banks such as NatWest Group and HSBC Holdings have already limited how much money their UK clients can move to crypto exchanges.
But things are getting even worse as British banks have recently started rejecting crypto companies in the UK, as reported by Bloomberg.
For instance, Edouard Daunizeau, the owner of a one-year-old crypto startup called SavingBlocks, was barely allowed to register a bank account for his business. SavingBlocks aims to offer a quick and easy way for investors to create and manage their crypto portfolios.
Initially, Daunizeau applied to and was rejected by seven banks before he managed to find two that would accept him. But soon after the banks agreed to serve him, they started burying him with demands for paperwork, asking for detailed descriptions of transaction screening procedures.
Many other crypto executives reported experiencing the same problem. They either get denied or buried with paperwork. Some executives have even complained to the government directly.
To work around these growing restrictions, Edouard Daunizeau decided to seek a license in France. If nothing changes, others are likely to follow in his footsteps.
The Current State of Crypto Banking
Large banks have long been wary of the crypto sector, believing that its money-laundering potential and potential compliance issues could subject them to regulatory scrutiny.
This concern enabled smaller US banks, such as Signature and Silvergate, to dominate the crypto banking niche.
Last year, however, the crypto industry experienced some disastrous scandals and failures. Its reputation was severely damaged by the fall of Terra (LUNA) and the bankruptcy of the FTX exchange.
In turn, these events led to the downfall of Signature and Silvergate banks.
One day, cryptocurrency could completely replace the money we use today. But the crypto industry, in its current state, still depends on fiat currencies in order to work. As an example, we have to use fiat to purchase cryptocurrency.
What Others Have to Say
UK businesses are getting mixed messages from institutions. On one hand, their government is telling them to expand there, and on the other, they are getting rejected by lenders.
This was also acknowledged by Tom Duff Gordon, the VP of international policy at Coinbase, who said:
“The UK banking reaction has been more acute than the EU one.”
Furthermore, Jeff Hancock, the chief executive of UK crypto exchange Coinpass, stated that limited banking access “hampers the efforts to make the UK a crypto hub,” referring to prime minister Rishi’s plans announced in 2022.
Coinpass is another crypto company that has turned to alternative payment service providers such as Stripe and BCB Payments to handle services such as client deposits and payment processing. Such platforms operate under the UK’s money-licensing framework and can provide basic services, such as money transfers, to digital asset companies.
Even so, Paysafe has recently reported it will no longer provide one of its products to UK users of the cryptocurrency exchange Binance, citing the challenging legal climate. This change forced Binance to disable bank transfers and credit card transactions for its UK clients. Put simply, UK clients no longer had a way of withdrawing their money into their bank accounts.
Finally, Joe David, the co-founder of Nephos, an accounting company that caters to crypto clients, reported getting his Wise accounts blocked for over three months. After Wise told Joe he had breached its terms of service, he asked for further elaboration. He was then simply referred to the crypto section of their policy.