Insiders told Bloomberg that U.K. crypto firms are having trouble getting banking services, causing difficulties for the industry. Banks serving crypto firms increase requirements and demand more documentation and insights into transaction monitoring. Few banks continue to serve crypto companies.
According to reports, these companies are encountering obstacles, including rejected applications, frozen accounts, and overwhelming paperwork. Allegedly, the increased level of challenges has led certain crypto businesses to express their complaints to the government of Prime Minister Rishi Sunak.
Despite Sunak’s ambition to encourage fintech innovation and turn the U.K into a cryptocurrency hub, some challenges contradict this goal. According to Tom Duff-Gordon, Vice President of International Policy at Coinbase, U.K banks react more to these challenges than their European Union counterparts.
This decision shows the the forward-looking approach we are determined to take towards cryptoassets in the UK. pic.twitter.com/cd0tiailBK
— HM Treasury (@hmtreasury) April 4, 2022
He claimed that banks in other countries are becoming more open to cryptocurrency companies due to the European Union’s efforts to set up a structure for digital assets.
EU Advances In Crypto Legislation Highlight UK’s Struggle
The European parliamentary committee approved the MiCA legislation in October 2022. Its introduction in September 2020 makes this a significant advancement. This month’s schedule includes the final vote for the legislation, as noted in the article.
PitchBook information suggests investment by venture capital firms in digital asset enterprises in the U.K. decreased dramatically by 94% to $55 million in 2023. In contrast, other European nations have experienced a 31% growth. Consequently, reports indicate that crypto companies in the U.K are relying on payment service providers like BCB Payments and Stripe to maintain their operations.
HSBC and Nationwide banned credit card purchases of cryptocurrencies in March, following other UK banks’ regulatory measures. Furthermore, this move reflects a trend towards tighter controls on digital assets among traditional financial institutions. The restrictions affect retail customers, while the crypto market continues to attract interest from institutional investors.
CryptoUK suggested creating an “allowlist” of authorized cryptocurrency companies nationwide. This was in response to banks limiting or completely stopping transactions with such businesses. A self-regulatory trade association made the proposal. Concerned about the development, CryptoUK declared: “We believe that government action is now needed.”
Authorities in the U.K. are strengthening controls on cryptocurrency businesses, much like those in the United States. In February, the Financial Conduct Authority put up a series of regulations that may result in leaders of crypto businesses doing two years in prison if they aren’t followed.