“UK Banks Tighten Restrictions on Crypto Clients, Pushing Them Towards Payment Service Providers”

Crypto companies are facing difficulties accessing banking services in the United Kingdom, according to multiple sources interviewed by Bloomberg. The few banks still working with crypto firms are requesting more documentation and information about how they monitor clients’ transactions.

Challenges for crypto companies range from having applications rejected, accounts frozen, to being overwhelmed with paperwork. Crypto companies have even complained to the government of Prime Minister Rishi Sunak, as the situation worsened in the past weeks. The move goes in the opposite direction of Sunak’s plans to prioritize financial technology disruption and make the U.K. a global crypto hub.

European Union’s efforts

“The U.K. banking reaction has been more acute than the EU one,” Tom Duff-Gordon, vice president of international policy at Coinbase, told Bloomberg. According to Duff-Gordon, the European Union’s efforts to establish a framework for digital assets are making banks more receptive to crypto firms in other countries. The European parliamentary committee passed the Markets in Crypto Assets (MiCA) legislation in October, nearly two years after it was first introduced in September 2020. Its final vote is scheduled for this month.

Venture capital investment in digital asset companies

So far in 2023, venture capital investment in digital asset companies reportedly dropped 94% to $55 million in the U.K., according to data from PitchBook, against a 31% increase in other countries in Europe. Crypto companies are turning to payment service providers such as BCB Payments and Stripe to maintain business operations in the U.K.

Restrictions on digital assets

Earlier in March, the HSBC Holdings and Nationwide Building Society banned cryptocurrency purchases via credit cards for retail customers, joining a growing list of banks in the country to tighten restrictions on digital assets.

Proposal for the creation of a “white list”

Also in March, the self-regulatory trade association CryptoUK proposed the creation of a “white list” of registered firms in the country to address banks limiting or banning transactions with crypto companies. “Many of the major U.K. banks have now put in place bans or restrictions, and we are concerned that other banks and Payment Services Providers (PSP’s) may also soon follow suit,” said CryptoUK. “We believe that government action is now warranted.”

Tightening regulations on crypto companies

Similar to the United States, authorities in the U.K. are tightening regulations on crypto companies. The Financial Conduct Authority proposed in February a set of rules that could subject executives of crypto firms to two years in prison if they don’t meet certain conditions related to promotion.

• Challenges for crypto companies range from having applications rejected, accounts frozen, to being overwhelmed with paperwork.
• HSBC Holdings and Nationwide Building Society banned cryptocurrency purchases via credit cards for retail customers.
• The Financial Conduct Authority proposed rules that could subject executives of crypto firms to two years in prison.
• Venture capital investment in digital asset companies reportedly dropped 94% to $55 million in the U.K.

In conclusion, crypto companies are facing challenges in accessing banking services in the UK. Banks are requesting more documentation and information about how they monitor clients’ transactions, leading to applications being rejected, accounts being frozen, and overwhelming paperwork. The move goes in the opposite direction of the government’s plans to prioritize financial technology disruption and make the UK a global crypto hub.