Crypto Chaos: UK's Banking System Suffers Major Blow

Crypto Chaos: UK's Banking System Suffers Major Blow

written by John Murphy | March 26, 2023

The United Kingdom has faced a significant number of problems when it comes to crypto banking. The country has remained one of the leading financial hubs globally, offering various financial services to individuals and businesses, however, with the adoption of cryptocurrencies.

UK lobby groups and MPs are complaining that crypto customers cannot find banks and are facing restrictions, and are calling on the government to take action. 

Key Takeaways

  • The UK crypto banking sector has faced increasing challenges recently.
  • Some crypto-related businesses have been denied banking services.
  • Regulatory uncertainty and lack of guidance from authorities have contributed to these problems.

Many UK crypto firms find banking services difficult as many banks restrict interactions with the sector as a whole, crypto advocates said.  

After the collapse of US banks Silicon Valley, Silvergate, or Signature, US crypto customers had to find new banking partners but this isn’t the only place companies find themselves in dilemma. 

Many of the UK’s major banks now banning, restricting, or we fear other banks and payment service providers (PSPs) will soon follow “it,” said, the operation manager at Crypto UK. Carpenter said in a letter.

Treasury Secretary Andrew Griffith on Monday Crypto UK is a lobby group that advocates for digital assets. People also complain on Twitter that British banks have banned wire transfers to cryptocurrency exchanges.  

Lisa Cameron, MP or chairman of Crypto or the Digital Assets Group, said in a statement that crypto companies could not open the Santander or NatWest Group bank account. 

A NatWest spokesperson said, the bank

“does not currently offer banking functions to companies buying or selling cryptocurrencies. This is a rapidly evolving field in the UK or we are constantly reviewing our stance.” 

“We make all decisions regarding, the addition of the new banking entities on a case-by-case basis or based on a specific detail of each entity.”

Banks Restrict Crypto Payments

UK banks have pulled back from cryptocurrencies in recent years. NatWest CEO Alison Rose said during a February hearing of the House Finance Committee that the bank

“due to the volatility and stability of the platform, which is why retail and high-net-worth customers are using cryptocurrencies.”

In addition to restricting switching to Rose, it also mentioned fraud as an issue.  

The bank increased customer payments on crypto exchanges to £1,000 ($1,232) per day and £5,000 ($6,161) for 30 days in March to protect consumers from “cryptocriminals” 

Cryptocurrency payments are restricted by many other banks to exchanges as a safety measure. Nationwide and HSBC announced limits on cryptocurrency purchases almost simultaneously. 

Several banks have reported limiting their cryptocurrency exchange transactions to £1,000, including Spanish bank Santander, which operates in the UK, and Sterling Bank, which has offices in the country and has no support for debit cards or bank transfers.

Below we explore some of the issues the UK has faced in the crypto banking sector.

Regulatory Challenges:

The UK has struggled to create a friendly environment in the crypto banking sector that benefits customers and regulatory authorities. The country’s regulatory landscape regarding cryptocurrencies must be clarified, leading to confusion among crypto investors and customers. 

Banking Restrictions:

Another problem the UK crypto banking sector has faced is banking restrictions. The banks in the country have been reluctant to offer services to crypto-related businesses and customers. This was mainly due to a need for more clarity in the regulatory framework surrounding cryptocurrencies, making banks cautious in their dealings with crypto businesses.