UK banks accused of “unbanking” customers over crypto
UK banks are banning payments to cryptocurrency exchanges, in a bid to limit risks.
UK banks have been tightening their curbs on customers’ payments to crypto firms by introducing further limits and, in some cases, a ban.
Traditionally, banks have had a cautious attitude towards cryptocurrency but in the past year, this has stepped up a notch.
Some in the crypto community have expressed concern. Teanna Baker-Taylor, European policy lead at stablecoin specialist Circle, has gone as far as to claim banks are “actively unbanking people”.
This is all happening against a backdrop of the government’s plans to make the UK a global cryptoasset technology hub.
Are there any crypto-friendly banks?
There are very few banking providers in the UK that have fully committed to supporting crypto. Revolut is one of these, but it has yet to receive a banking licence from the Financial Conduct Authority (FCA).
Research from Finder in 2022 showed that most banks (53%) were “unfriendly” towards crypto, based on their answers in a survey, while 35% had a mixed approach. It is this mixed approach that’s shifted in the last few months towards a more “unfriendly” stance.
What does “unfriendly” mean in practice? In November 2022, Santander announced plans to block UK customers from sending real-time payments to cryptocurrency exchanges at an unspecified point in 2023. So far in 2023, NatWest has placed a limit on the amount of money customers can transfer to cryptocurrency exchanges – a maximum of £1,000 a day and no more than £5,000 per month. Meanwhile, the building society Nationwide said it would not allow payments to crypto exchanges using its credit cards and that it would impose a £5,000 daily limit on current account crypto spending. HSBC has been preventing customers from using their credit cards to buy cryptocurrencies and Chase UK has issued a blanket ban on customers buying crypto.
The banks and building societies have cited scam fears and the FCA’s concerns that cryptocurrencies are high-risk, speculative assets. The high-risk nature of crypto is well known. But when it comes to scams, Baker-Taylor has asserted that the risk of fraud is as present in traditional finance as it is in crypto.
Is crypto being singled out?
The collapse of the FTX crypto exchange had a huge impact on attitudes towards cryptocurrency and has stalled moves towards wider adoption.
Bitcoin’s price plummeted, the crypto markets were plunged into a bear market and more than a million FTX customers lost their money.
Cryptocurrency is unregulated in the UK – although there are plans for this to change. There are no protections for customers’ money – there’s no equivalent of the Financial Services Compensation Scheme – and customers can’t use the Financial Ombudsman.
Banks’ attitude to crypto has toughened as the crypto market has grown – along with the amount of fraud.
Financial losses from crypto fraud increased 41% to £306 million in the 12 months to March 2023, according to data collected by the UK’s cybercrime reporting centre Action Fraud. However, more than a third of crypto fraud losses for the year occurred in November 2022. The same month FTX filed for bankruptcy.
Fraud in general fell 8% year on year in 2022. But authorised push payments (APP) fraud – where fraudsters use personal information against you to trick you into making a payment – made up the biggest amount of losses. Neobanks like Starling and Monzo have seen fraud complaints increase as scammers look to exploit some customers’ willingness to comply with digital requests without checking with their bank.
Why are banks doing this?
The key issue with crypto is that it remains unregulated and investors aren’t protected. Banks feel they need to step in to protect customers – by limiting payments and payment methods, they’re reducing customers’ exposure to potential bad actors and protecting themselves.
While FCA research found that the number of crypto investors is growing, the UK is far off crypto mass adoption – Finder’s 2023 survey suggests that 6% of Brits have invested in cryptocurrency.
And until crypto regulation is a reality in the UK, banking options for retail investors are likely to remain limited, making mass adoption unlikely.
About the author
Kate Steere is a deputy editor at Finder.com, specialising in banking and fintech. She has previously written for The Motley Fool UK and Fitch Solutions, where she covered a wide range of personal finance topics and kept a close eye on market trends. Kate is regularly quoted in the national media about banking, fintech and mortgages.