UK Banking and Their Attitude Towards Crypto

The Cautious Approach

Many UK banks have adopted a cautious stance towards crypto. This caution is largely driven by concerns over the regulatory framework, which remains unclear and constantly evolving. Banks are wary of the potential risks associated with crypto, such as money laundering, fraud, and market manipulation. High-profile incidents, like the collapse of the FTX exchange, have only heightened these concerns.

Blocking Transactions

Several high-street banks in the UK have taken steps to block transactions to and from major crypto exchanges like Binance and Coinbase.

This move has frustrated many retail customers who find themselves unable to withdraw their crypto assets from exchanges or make deposits. The banks argue that these measures are necessary to protect consumers from potential financial harm and to comply with stringent regulatory requirements.

Government's Vision

Despite the cautious approach of many banks, the UK government has expressed a strong interest in making the country a global hub for crypto and fintech innovation. In April 2022, the government outlined its vision to create a favourable environment for crypto businesses to thrive. This includes developing a clear regulatory framework that balances innovation with consumer protection.

Recent Updates on UK's Government Crypto Vision

Since the announcement in April 2022, the UK government has continued to push forward with its plans to make the UK a global hub for crypto. Key updates include:

• Stablecoins Regulation: The government has moved to recognise stablecoins as a valid form of payment, bringing them within the regulatory perimeter.
• Financial Market Infrastructure Sandbox: A sandbox has been introduced to help firms innovate and experiment with new technologies in a controlled environment.
• Cryptoasset Engagement Group: This group has been established to work more closely with the industry and ensure that the regulatory framework supports innovation while protecting consumers.
• Tax System Enhancements: The government is exploring ways to enhance the competitiveness of the UK tax system to encourage further development of the cryptoasset market.

UK Banks and Their Rules on Crypto Exchanges

Here's a list of major UK banks and their current rules on dealing with crypto exchanges:

• HSBC: Restricts credit card purchases of crypto and imposes daily limits on debit card transactions.
• NatWest: Blocks transactions to and from major crypto exchanges and has introduced low daily limits on transfers.
• Santander: Similar to HSBC, Santander restricts credit card purchases and imposes daily limits on debit card transactions.
• Nationwide: Recently introduced daily limits for crypto purchases and restricts credit card transactions.
• Barclays: Allows transactions but monitors them closely for any suspicious activity.
• Revolut: One of the most crypto-friendly institutions, allowing users to buy, sell, and transfer cryptocurrencies freely.
• Starling Bank: Among the first to ban cryptocurrency purchases, blocking both debit card payments and bank transfers to buy or sell crypto.

Expected Crypto Regulation Changes in the UK and Europe in 2025

2025 is set to be a transformative year for crypto regulation in both the UK and Europe. Here are some key changes to watch for:

• Markets in Crypto-Assets (MiCA) Regulation: The full implementation of MiCA in the European Union will introduce a harmonized regulatory framework for crypto-assets across the EU. This regulation aims to address investor protection, market integrity, and financial stability. MiCA will enable firms licensed in one EU country to operate across the entire bloc, potentially making countries like Germany, France, and Portugal new hubs for crypto businesses.
• UK's Phased Regulatory Strategy: The UK is expected to continue its phased approach to crypto regulation. Phase 1 focuses on fiat-backed stablecoins, while Phase 2 aims to implement a more comprehensive framework for all crypto assets. The government is also exploring the concept of a Digital Pound and has made progress toward establishing a Digital Securities Sandbox.
• Increased Regulatory Clarity: Both the UK and the EU are working towards providing clearer regulatory guidelines for crypto businesses. This includes addressing anti-money laundering (AML) and counter-terrorism financing (CTF) requirements, as well as enhancing consumer protection measures.
• Innovation and Compliance: As regulations become more defined, there will be a greater emphasis on balancing innovation with compliance. This could lead to increased stability and security for investors, but also pose challenges for smaller players in the market.

The Future of Crypto in UK Banking

The future of crypto in the UK banking sector remains uncertain. While some banks continue to block transactions, others are exploring ways to integrate crypto currencies into their services. The key to success will be finding a balance between embracing innovation and managing the associated risks.

As the regulatory landscape evolves, it will be interesting to see how UK banks adapt to crypto and whether they will eventually open their doors to the burgeoning world of crypto.

How can Charlton Baker help you?

We are the UK's leading Crypto Tax specialists. We know crypto and can be your comprehensive and expert tax guide at all levels of complexity – from crypto currencies and NFTs, to trading and DeFi.

You can find out more about our Crypto Tax services here. 

Or give our expert Crypto Tax team a call on 01380 723692 or send them an email for an informal chat.  

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