Companies that deal in cryptocurrency, or even handle the digital asset, are being shunned by the traditional banking system in the United Kingdom. This is forcing many of these companies to go offshore for their banking needs.
Places such as Gibraltar, Poland and Bulgaria are hotspots for these companies that are not being accommodated, but the real issue being raised is the ambition the UK has to be a global hub for the fast-growing fintech sector.
Traditionally steering clear
Because of its disruptive nature, Bitcoin and other cryptocurrencies sit very uneasily with the traditional banking sector as there is a fear the digital currency could render them obsolete.
This has many big banks, especially in Wall Street in the US, steering clear, but they are also stating fears surrounding the digital currency being a haven for fraudsters and criminals.
“Nobody will give us a bank account in the UK.”
James Godfrey, head of capital markets at BlockEx, a platform for trading digital assets including cryptocurrencies.
He said Metro Bank recently shut its UK account, forcing it to rely on a Bulgarian lender to keep trading.
Sending Blockchain running
There is also clearly a big divide between those who back Blockchain technology and those who back Bitcoin, with there being some overlap but also some who oppose the other – Bitcoin especially.
While the UK is keen to utilize the Blockchain, they are not helping their cause with moves like this as it is pushing Blockchain startups out the country.
Godfrey said the disruption had prompted BlockEx to consider moving to a more welcoming location, such as Toronto. “Having [Bank of England governor] Mark Carney standing at the front of the shop and saying ‘raa, raa, fintech’ just doesn’t do it for me.”
Michael Hudson, chief executive of the Bitcoin investment firm Bitstocks, said:
“It is almost an impossibility to get a UK bank account. We bank in Gibraltar and Poland — the two jurisdictions that are most stable. We had an account in Bulgaria, but that didn’t last long.”
Old fears
The banking sector is still happy to put up excuses that were probably once quite legitimate, such as fears of Bitcoin being a tool of the dark web. However, digital currencies have evolved somewhat from that, yet the understanding in banking has not.
Banks are keeping their distance, worried by the fact that cryptocurrencies are commonly used by criminals to trade illicit goods on the dark web. A few countries, including Japan and Gibraltar, have created rules for cryptocurrencies, but they remain unregulated in many parts of the world, including much of Europe.
One UK bank boss said:
“When you look on the dark web, everything there is being paid for with cryptocurrencies. You don’t know who is transferring money in and out. If cryptocurrency goes to Iran and we’re involved, then I get shut down.”