Challenges crypto companies face include rejected applications, frozen accounts, and being overwhelmed by paperwork.
According to multiple sources interviewed by Bloomberg, cryptocurrency companies are having difficulty getting banking services in the U.K. The few banks that are still working with cryptocurrency companies are asking for more documents and information about how they monitor customer transactions.
Challenges include rejected applications, frozen accounts and heavy paperwork. As the situation worsened over the past few weeks, cryptocurrency companies even complained to Chancellor Rishi Sunak's government. The move runs counter to Sunak's plans to prioritize financial technology disruption and make the UK a global crypto hub.
“The U.K. banking industry has been more responsive than the EU,” Tom Duff-Gordon, vice president of international policy at Coinbase, told Bloomberg. According to Duff-Gordon, the EU’s efforts to establish a digital asset framework are making it easier for banks to accept crypto companies from other countries. The Markets in Crypto-Assets (MiCA) legislation was passed by a European Parliament committee in October, nearly two years after it was first introduced in September 2020. Its final vote is scheduled for this month.
According to PitchBook data, so far in 2023, venture capital investment in digital asset companies in the UK has reportedly fallen 94% to $55 million, while the rest of Europe has seen a 31% increase. Cryptocurrency companies are turning to payment service providers such as BCB Payments and Stripe to maintain business operations in the UK.
In early March, HSBC Holdings and Nationwide Building Society banned retail customers from buying cryptocurrencies via credit cards, joining a growing list of banks in the country to tighten restrictions on digital assets.
Also in March, self-regulatory industry association CryptoUK proposed creating a “white list” of registered companies in the country to address banks’ restrictions or prohibitions on dealing with crypto companies. “Many major UK banks have now implemented bans or restrictions, and we are concerned that other banks and payment service providers (PSPs) may soon follow suit,” CryptoUK said. “We believe that government action is now necessary.”
Similar to the U.S., British authorities are tightening regulation of crypto companies. The Financial Conduct Authority proposed a set of rules in February that could see crypto executives sentenced to two years in prison if they fail to meet certain conditions related to promotions.
