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United Kingdom banks hate crypto, and that’s bad news for everyone

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In 2018, the UK’s Financial Conduct Authority (FCA) wrote a letter to the heads of the country’s largest high street banks to highlight the importance of due diligence when dealing with crypto businesses. The ubiquitous high ratings of cryptocurrencies and the ban on crypto-related banking appear to have implications for both crypto businesses and investors looking to do business in the UK.

Banks are naturally concerned with fraud responsibly, but the current situation creates uncertainty.Crypto Investors Need To Move Money As They Like, Crypto Businesses Need Access to payment rail For various other reasons, such as paying staff or suppliers.

Catch 22 that hinders market competition

Banning cryptocurrency businesses from accessing “mainstream” banking will force organizations to use payment service providers (PSPs). PSPs are also used in the gambling industry and are therefore rated as high risk by banks. There are nuances to this process, and banks tend to process blanket block transactions through PSPs.

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For certain services, such as payment processing, refusal to service cryptocurrencies also harms market competition. There is a sense that banks are reluctant to de-risk cryptocurrencies and facilitate payments from cryptocurrencies to banks. If that is true, regulators will have to step in to keep the market competitive.

Restrictions on personal liberty

Banks’ economic risk and reward calculations mean they continue to dip their toes in providing banking services to crypto service providers, but their relationship is problematic. We provide fast payment services to Coinbase. abruptly ended after 3 monthsIt may have been determined that the risk was too great for the amount of money in return.

Banks are increasingly blocking cryptocurrency payments outright or initiating fraud prevention processes that call on customers to make sure they understand the “risk” of their transactions. This violates the public’s freedom to do as they please with their finances and does not justify the risk weighting given to cryptocurrency-related transactions.

banks are inconsistent

Crypto businesses struggle to open bank accounts, restricting investor freedom teeth Virtually all major banks are showing great interest in cryptocurrencies. But that’s only one side of the bank. They’re looking at whether cryptocurrencies work from an institutional investment perspective, but that willingness and knowledge isn’t getting across to the people doing transaction banking across the building: retail and corporate. I can’t even eat it. Adoption of crypto as a form of institutional investment is hampered by the same issues. Banks exhibit a short-sighted attitude, failing to translate their interests in one area into meaningful processes in others, which is detrimental to all aspects.

BCB, Revolut, Clear Junction and ClearBank all offer cryptocurrency related banking relationships or UK bank accounts. The fact that a limited number of PSPs can work with cryptocurrency businesses and investors without significant regulatory sanctions, greater risk exposure than other organizations, and compliance comparable to major retail banks The fact that we have a team shows that it is possible. Banks fail to recognize the magnitude of this opportunity—an opportunity already successfully unearthed by some organizations—to create a more competitive environment.

Related: CFTC action shows why cryptocurrency developers should prepare to leave the US

Organizations that conduct minority transactions in cryptocurrencies are also unfairly penalized by banks’ perceptions of cryptocurrencies. This is where cryptocurrencies are a small part of their business and risk may otherwise be approved by retail banks, but alongside crypto natives, access to banking and payment services We are forced to find new ways. By misinterpreting the diversity of the cryptosphere, accounting firms and law firms involved in crypto, even if they are smaller, are embracing the same umbrella as wallets and exchanges. subject to legal prohibition.

Similar to government intervention, transparency in risk assessment helps

We need government intervention and we need it now. Adoption is growing and crypto is going nowhere. And more than that, then-Secretary of the Economy, Congressman John Glenn, was suggested In April, there was an ambition for the UK to “lead the way” in crypto and blockchain. It is the single biggest challenge to thrive in this new economy.

In addition to highlighting the importance of due diligence, the 2018 FCA letter to banks is responsible for upskilling staff with the knowledge and expertise to be able to conduct risk assessments of cryptocurrency businesses. It’s not happening. On the payment side, there is little evidence of upskilling or attempts to understand cryptocurrencies, so they are unable to assess risk more accurately. I called for a comprehensive ban.

The FCA stepped in and provided licenses to cryptocurrency organizations only if they could prove it. Anti-money laundering and customer understanding A process to be able to operate and trade in the UK — hence the need for effective banking relationships to enable it.

In line with government ambitions, the crypto industry is well established and eager to grow. However, the biggest challenge to its growth is the refusal of banks to serve cryptocurrency businesses and investors. Without urgent intervention to clarify decisions and force bank-related support, UK crypto participants may reconsider using restricted banking services through PSPs or being based in the UK. forced to do so. That’s bad news for everyone.

Ian Taylor is Executive Director of CryptoUK, an independent trade body for the UK digital asset industry.

This article is for general information purposes and is not intended, and should not be construed as legal or investment advice. The views, thoughts and opinions expressed herein are those of the author and do not necessarily reflect or represent the views or opinions of Cointelegraph.

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