The government must “intervene” to ensure banks work with crypto firms after several financial institutions recently enforced bans, according to the UK’s crypto trade body.
Speaking to UKTN, Su Carpenter, director of operations at CryptoUK, called out banks for their “risk averse” approach to cryptoassets.
Last month, Chase UK announced the bank would no longer allow transactions relating to cryptoassets in an effort to crack down on the use of the alternative currency in crime.
“We acknowledge that crypto can be considered a source of fraud,” said Carpenter. “But there are a lot of other areas as well that bring fraudulent activity.”
For Carpenter, there is a lack of willingness from some banks to properly implement financial safeguards that give users the choice of using crypto and, in some cases, banks are unfairly assigning blame of fraud to the technology.
“Labelling all fraud that takes place this way as crypto fraud isn’t necessarily right. A fraud and a scam is a fraud and a scam, however you’re looking to approach it.”
Carpenter said that when it comes to crypto, the term alone is enough for some to “raise eyebrows and cause a lot of concern”, regardless of whether fault can be genuinely pinned on the technology.
Chase UK is not alone as a bank being weary of embracing crypto payments. Last year, challenger bank Starling said it would no longer support crypto transactions after a review of its financial crime prevention policy.
CryptoUK has argued that in cases where banks are choosing to ban crypto outright, the government should be willing to intervene to facilitate cooperation between traditional financial institutions and crypto firms.
Carpenter said it is now on the government to “intervene” and “force both sides of the fence to come together” and find ways to “de-risk” crypto transactions.
“The risk argument that is coming from the banks isn’t necessarily underpinned by accuracy,” Carpenter said.
The trade body has accepted that without proper regulation, “full recourse on instances of fraud will sit on the banks”, which encourages this lack of risk appetite when it comes to the blockchain. However, it argued that without a proper open dialogue, the problem won’t be resolved.
Is the UK hostile to crypto?
According to Carpenter, despite signs that the government is keen to engage with the UK crypto industry, the country is not the “global cryptoasset hub” that Rishi Sunak dreamt of a year and a half ago.
She said there had, however, been “positive inroads” in trying to “back up the rhetoric” from the government last year about embracing crypto.
The government may regularly communicate with the crypto industry as a show of support, but when it comes to actionable regulation, CryptoUK has been left somewhat dissatisfied with the current policies of the UK’s financial watchdog.
The Financial Conduct Authority (FCA) this month enforced new crypto promotion rules that strictly regulate how firms can advertise crypto opportunities.
The FCA said the measures will ensure customers are adequately protected from high-risk investments and potential fraud. CryptoUK, however, argues the system was put in place to “add additional levels of friction to the customer onboarding process”, which Carpenter says will make consumer protection “more difficult” as it discourages direct engagement.
Carpenter acknowledged that much of the apparent bad blood between the FCA and the crypto industry stems from the regulator being tasked with overseeing crypto without a clear remit and in a very short time period.
The FCA has always taken a strong position of consumer protection, which, according to Carpenter, generated “quite a lot of bad feeling” among the industry that the regulator can’t help.
“[Crypto regulation] kind of fell into the FCA as a bit of a default, and they weren’t given much guidance or support on whether or not they should be regulating within this space.”
After the FCA brought in the crypto promotion rules, Binance, the world’s largest cryptocurrency exchange, said it would no longer take on new UK customers.
An FCA spokesperson told UKTN: “As we’ve brought in new [crypto] standards, we’ve worked closely with firms to help them get ready for the deadline set by legislation.
“The new rules are designed to give people the right information and risk warnings ahead of making an investment. They align the minimum standards for crypto marketing with those already in place for other high-risk investments.”