The past few months have seen an increase in the freezing or restriction of bank accounts of crypto professionals in the UK, US, and EU. They say you don’t really care until it happens to you, and this week it really happened to me. I was very surprised that it came from where I least expected it.

Despite certain limitations, Revolut has long been seen as the most crypto-friendly bank in the U.K., offering in-app crypto purchases and eventually adding the ability to send and receive crypto in 2023.

However, recent events have called into question the bank’s commitment to providing a seamless experience for customers using cryptocurrencies.

How the UK's Most Crypto-Friendly Bank Froze My 0.23ETH Account

Two days ago, I purchased 0.23 ETH (worth £550) through the Revolut app and tried to transfer the funds to my personal Ethereum wallet, which is linked to a well-known ENS domain. To my surprise, Revolut blocked the transaction and charged the account.

In addition, my entire bank account, including my and my wife's joint account, was frozen.

After several hours of frustration and confusion, the account was eventually unfrozen and the fees refunded after further requests. However, the specific wallet address remained blocked, preventing me from sending funds to that account. This experience made me question the authenticity of Revolut's alleged crypto-friendliness.

Given the other options in the UK, Revolut remains the best option for those unhappy with traditional banks, but the bar is low. I think incidents like this have less to do with whether Revolut is "anti-crypto" and more to do with fear of regulatory retaliation.

Nonetheless, my chats with the Revolut customer service team revealed a lack of transparency regarding the reasons behind frozen accounts and blocked wallet addresses. Support representatives failed to provide a clear explanation, citing internal policies that prevented them from sharing specific reasons for these actions.

The incident raises concerns about Revolut users’ autonomy and control over their funds, particularly when it comes to digital asset trading. Blocking individual wallet addresses without a satisfactory explanation undermines trust in banks’ ability to facilitate smooth cryptocurrency transactions.

As the UK navigates a post-Brexit financial landscape, banks like Revolut must find a balance between complying with regulations and providing a customer-friendly experience. Strict application of the law and a lack of transparency when resolving account and wallet issues could alienate cryptocurrency users who rely on these services. This is especially important considering that the company is planning to launch a dedicated cryptocurrency trading platform.

Banking for US Cryptocurrency Users Delisted

In the United States, even long-term traditional bank customers face the risk of having their accounts closed if they are involved in digital assets. John Paller, co-founder of ETH Denver, recently shared his experience on Twitter, revealing that Wells Fargo locked him out after 26 years of loyal customer relationships and millions in fees. Although Paller has not used his personal account to make cryptocurrency purchases recently, his checking account, savings account, credit card, personal line of credit, nonprofit account, and business account were all closed without any explanation.

Caitlin Long, founder and CEO of Custodia Bank, responded to Paller's tweet, noting a significant increase in inquiries from crypto companies that are desperate to replace bank accounts that have been closed by banks. She called the trend another wave of "Operation Choke Point 2.0," hinting at a full-scale crackdown on cryptocurrency-related businesses.

Bob Summerwill, director of the Ethereum Classic Partnership, echoed the same sentiment, stressing the need for banks like Custodia. He shared his own experience with PayPal, which closed the Ethereum Classic Partnership’s account without providing a specific reason, only stating that the decision was permanent and could not be reversed.

These events highlight growing concerns within the crypto community that even those with established relationships and a history of compliance with traditional banks are at risk of losing banking services. The lack of transparency and sudden nature of these account closures raise questions about the potential motivations behind these actions and the potential impact on the growth and adoption of cryptocurrencies in the United States.

Friction actually means a bad user experience

Anecdotally, I've also heard from at least five other people working in the crypto industry who routinely move large amounts of fiat currency through traditional banks whose accounts have been frozen. I'm not advocating for the Wild West; all I'm asking for is common-sense regulation.

The UK’s regulatory approach also includes what it considers “positive friction.” The concept refers to a range of regulatory measures designed to introduce certain barriers or checks that slow down the process of investing in digital assets. These measures are intended to counteract the social and emotional pressures that may cause individuals to make hasty or unwise investment decisions.

The Financial Conduct Authority (FCA) introduced these “positive frictions” as part of its financial promotions legislation, which aims to strengthen consumer protection in the crypto market.

Specific examples of “positive friction” include personalized risk warnings and 24-hour cooling-off periods for first-time investors. These measures are designed to ensure that individuals fully understand the risks associated with crypto investments and have enough time to reconsider their investment decisions without immediate emotional or social pressure.

The reality is a series of questions designed to scare off new investors, followed by an unsightly banner warning at the top of every crypto app that never seems to go away, even if you pass all the requirements.

I wonder when the government will implement the fractional reserve banking test for all traditional financial customers? We have to understand the details of FCA regulation of cryptocurrencies, such as who the FCA regulates and whether a white paper is required. If we ask ten people on the street to tell us what happens when you deposit funds into their checking account. I wonder how many people will pass the test?

How many people know that the reserve requirement for banks in the US and UK is 0%? The previous 5-10% limit was lifted in 2020, and banks can now decide for themselves how much of their customers' funds to keep in cash. Therefore, a bank is fully entitled to accept a deposit of £1,000 and then lend the entire amount to another party.

Of course, traditional finance is regulated and currencies are “backed” by government insurance, so we don’t need to worry. Let’s not look back to 2008 when we had to rely on these tools, right? The collapse of Northern Rock required less than 10% of customers to withdraw their funds.

Banks don’t hold all your money; well-regulated cryptocurrency exchanges and self-custodial wallets are where your funds are actually held, yet regulators have made us fearful of crypto.

I think it's actually the banks that are scared. #英国银行  #账户冻结