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The UK banks increased the pressure on crypto companies following the collapse of Signature Bank and Silicon Valley Bank which affected the US.
Crypto companies in the UK are facing multiple challenges while trying to get access to various services from banks, with their applications getting rejected and excess paperwork required. It started in February after HSBC Holdings plc and National Westminster Bank, or simply NatWest (LON: NWG), announced restrictions on the purchase of digital currencies. In particular, NatWest imposed a £1,000 daily limit and £5,000 30-day limit on payments that can be sent to crypto exchanges, while HSBC prohibited its customers from buying cryptocurrencies with their credit cards.
As the UK banks have explained, the measures they are taking come as a result of the speculative and risky nature of digital assets.
A NatWest spokesperson commented:
“We adopt a risk-based approach to how we profile crypto exchanges. This means that we may restrict payments to specific exchanges based on the level of risk that we think that they pose. We don’t disclose all the controls we have in place to ensure we can continue to protect customers from the evolving threats posed by criminals.”
Another customer bank Paysafe Limited which provides online payments also said it would stop serving UK customers of Binance, the world’s leading crypto exchange. As the company has explained, “the UK regulatory environment in relation to crypto is too challenging” and its decision was made “in an abundance of caution.”
UK Tightening Crypto Regulation
The UK banks increased the pressure on crypto companies following the collapse of Signature Bank and Silicon Valley Bank which affected the US. As a result, some crypto companies are considering moving to Europe where banks are more crypto-friendly. For example, Edouard Daunizeau, CEO of the London-based crypto investing company SavingBlocks, is currently seeking a license in France.
In response to the restrictions imposed by banks, crypto companies in the UK have complained to the government of Prime Minister Rishi Sunak who has been an advocate of the crypto industry for a long time. Notably, before becoming Prime Minister in October 2022, Rishi Sunak was very positive about the state of digital assets while working as a Chancellor in the Boris Johnson government. In April 2022, he even spoke about making the UK a hub for crypto assets technology. However, a lot happened since then, including the downfall of FTX, the collapse of the two largest banks in the US, and an increase in regulatory pressure on Binance.
While Europe is preparing for the final vote on its Markets in Crypto Assets regulation (MiCA), the UK is tightening its crypto regulations. Earlier, the British government was working on bringing stablecoins within its regulatory framework, as well as launching a non-fungible token (NFT). However, last month, the UK Treasury Department revealed it would no longer proceed with its initial plans, citing the uncertainty across the crypto sector.
Besides, in February, the UK Financial Conduct Authority (FCA) proposed a “financial promotions regime” to Parliament, the document includes the requirement to get authorization from the FCA to advertise services or have an exemption under the Financial Promotion Order. Failing to meet the requirements related to advertsement services could lead to up to two years in jail.