Since taking office in October 2022, Rishi Sunak, the Prime Minister of the United Kingdom, has displayed his crypto ambition. That of making Great Britain the hub of crypto activities in the world. In recent months, observers have clearly seen actions in this direction being deployed. A law on cryptos is actively being prepared. Which is a good thing for the industry. But a problem persists. Banks seem particularly crypto skeptical. They are increasing the number of decisions likely to slow down the development of cryptos despite the government’s favorable policy. What could explain this trend and what would the implications be for the UK crypto industry? This is what we will see in the following lines.
Origin of British banks’ hostility towards cryptos
Tuesday September 26, Chase UK, the British branch of the JPMorgan banking group, announced a worrying decision for the crypto industry. The institution will ban purchases of cryptocurrencies from next month.
As a result of this choice, concerns about fraud were communicated to Chase UK customers by email. The Bank cites a surge in scams, including fake investments and dubious celebrity endorsements, linked to cryptos in Britain.
Chase UK suspends crypto purchases is remarkable in more than one way. The institution is not the first to take measures against the proliferation of acts of fraud which, it must be admitted, are legion in the crypto industry. The British international banking group HSBC, for example, has already stood out for having taken measures restricting crypto purchases by its customers. National Westminster Bank (NatWest), another British bank, also agreed.
Unlike the latter, Chase UK has opted for an outright ban. A hitherto rare option, which above all marks an escalation in the policy of British banks aimed at protecting their networks from fraudulent activities. The question we can objectively ask ourselves is to know the origin of this trend, the antithesis of the crypto policy desired and promoted by the government?
To understand it, we have to go back 5 years earlier. In 2018, the Financial Conduct Authority (FCA), the regulator of the British financial sector, sent a memo to the leaders of the country’s major banks. In this letter, the financial regulator called on these banks to demonstrate due diligence in their relationship with crypto firms.
It appears that this directive has resulted in crypto activities being classified as high risk, if not dangerous. A situation which, as if in a snowball effect, led to the widespread ban on crypto banking services. This has obviously had a negative effect on crypto firms wishing to operate in the UK and on potential investors. We understand better why a company like Binance decided to leave the United Kingdom a few weeks ago.
The hostility of British banks, a brake on the evolution of cryptos
It must be said that the trend towards restriction of crypto activities which Chase UK is crowning is seriously harming the sector. And it is not Brian Armstrong, CEO of Coinbase, who will say the opposite. The manager also strongly criticized the bank’s decision English which he considers absolutely unsuitable.
“Totally inappropriate behavior from Chase UK,” said Brian Armstrong on X (formerly Twitter), tagging the British authorities. This, by adding: “UK cryptocurrency holders should close their @Chase accounts if that’s how they’re going to behave.”
The opinion of the boss of Coinbase, shared by most players in the global crypto industry, clearly proves that there is unease. The latter is justified by the precarious situation in which the crypto industry would find itself if such a position were massively adopted. Because there is a significant risk of seeing the crypto industry suffer disastrous consequences for its growth in the country.
Thus, British banks represent a threat to the local cryptocurrency industry for several reasons. The first is that their approach compromises free competition. Their ban policy actually restricts crypto firms’ access to traditional banking services. The perverse effect of such a strategy is that it forces these companies to rely on payment service providers (PSP). Services much riskier than cryptos due to their links with the gambling ecosystem.
The second reason concerns the lack of transparency of banks regarding the assessment of risks that they cite as an argument. A dynamic that they could have implemented if their employees had acquired knowledge and developed relevant expertise in cryptos. However, we can tax banks for bad faith when we know that the FCA’s 2018 note underlined their responsibility in this regard. This is without taking into account, thirdly, that by acting in this way, banks like Chase UK are in fact encroaching on the personal financial freedoms of citizens. Especially since banks’ risk-reward calculations have led to a growing number of cases where they block crypto payments entirely. Failing to trigger fraud prevention measures requiring customers to verify their understanding of the associated risks.
The government must signal the end of recess!
This is the profound meaning of the reaction of Brian Armstrong, the CEO of Coinbase, in his intervention on UK. The manager believes that such a development is not in accordance with the crypto policy advocated by the administration in place. As a result, he expects the latter to intervene.
Government intervention is urgent. Because, despite everything, the adoption of cryptos continues to grow as their market becomes more and more established. Earlier this year, MP John Glen signaled the leading role his country wanted to play in the crypto and blockchain space.
The current context involving UK banks, companies and crypto investors contradicts this ambition. Above all, the situation represents the main obstacle to prosperity in this growing economic landscape.
Ultimately, the growing opposition of British banks to cryptos poses a major challenge to the growth of this industry. Recent restrictions imposed by institutions such as Chase UK are raising concerns about free competition and transparency in the sector. Reactions, including from Coinbase CEO Brian Armstrong, call for government intervention to restore balance and support the development of cryptos in the UK. Despite these obstacles, crypto adoption continues to grow. The British government still needs to act quickly to realize its ambition to play a leading role in this ecosystem with strong economic potential.
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