Cryptocurrency companies in the UK are facing a significant challenge in accessing banking services. According to sources interviewed by Bloomberg, the few banks still working with these firms are demanding more documentation and information about how they monitor clients’ transactions. This has resulted in applications being rejected, accounts being frozen, and overwhelming paperwork.
The situation has led crypto companies to complain to the government of Prime Minister Rishi Sunak, as the situation has worsened in recent weeks. However, the move goes against Sunak’s plans to prioritize financial technology disruption and make the UK a global crypto hub.
Tom Duff-Gordon, the Vice President of International Policy at Coinbase, told Bloomberg that the UK banking reaction has been more acute than that of the EU. According to him, 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.
Data from PitchBook shows that venture capital investment in digital asset companies in the UK has reportedly dropped by 94% to $55 million in 2023. This is in contrast to a 31% increase in other countries in Europe. To maintain business operations in the UK, crypto companies are turning to payment service providers such as BCB Payments and Stripe.
In March, 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. 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 UK banks have now put in place bans or restrictions, and there are concerns that other banks and Payment Services Providers (PSPs) may soon follow suit. Therefore, CryptoUK believes that government action is now warranted to address this issue.
