Challenges for crypto companies range from having applications rejected, accounts frozen, to being overwhelmed with paperwork.
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 client’s transactions.
Challenges include having applications rejected, accounts frozen, and 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 UK a global crypto hub.
“The UK 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 2022, nearly two years after it was first introduced in September 2020. Its final vote is scheduled for this month.
So far in 2023, venture capital investment in digital asset companies reportedly dropped 94% to $55 million in the UK, 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 UK.
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.
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 to crypto companies. “Many of the major UK 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.”
Similar to the United States, authorities in the UK 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.