Everyone, including the government, banks, and companies that work with cryptocurrency, need to work together to find a way to help the UK become a leader in financial technology (fintech).
Over the past few years, regulations for cryptocurrency have become stricter, which was necessary because of FTX’s failure.
Having good regulations for the new cryptocurrency industry is important because it creates opportunities. The UK government understands this, but unfortunately, traditional banks are making it difficult for people to take advantage of these opportunities by putting up obstacles.
In France, if a company follows the rules and regulations for offering cryptocurrency to customers, then banks are required to provide that company with banking services. The UK should do the same thing. Not only does the UK need to take advantage of new financial technology opportunities, but it should also work with other industries to make it happen.
Banking facilities are lacking
Since 2018, providing banking services for companies dealing with cryptocurrency has been seen as risky. The Financial Conduct Authority (FCA) reminded traditional banks to be very careful and do thorough research before working with crypto businesses.
In its recent consultation on cryptocurrency, the UK Treasury acknowledged that taking risks is a necessary part of innovation and wants to manage it instead of stopping it altogether. This consultation aligns with the UK government’s goal of using cryptocurrency to strengthen its position as a leader in financial technology (fintech).
Despite the UK government’s support for cryptocurrency, there are still not enough banks offering services to crypto businesses. Even if a bank does work with a crypto company, it may still restrict or block transactions between customers and other crypto exchanges.
Basically, instead of looking at each situation and deciding if it’s safe or not, banks are just saying no to everything related to cryptocurrency.
This approach has affected people who use cryptocurrency because they can’t easily exchange it for pounds. It’s also affecting companies that work with cryptocurrency because they need to pay their employees and suppliers. Banks are not working with these companies, so they have to use other payment service providers that are considered risky.
A call for collaboration
The Crypto and Digital Assets All-Party Parliamentary Group (APPG) looked into the problems faced by the digital assets industry, such as how banks are treating cryptocurrency. The results of the inquiry will be released soon.
Banks and other professional services need to work with cryptocurrency and digital asset companies in a fair and safe way. When these companies can’t get banking services, they can’t compete in the payment market, which stops them from growing and being innovative.
UK cryptocurrency companies are having trouble getting basic banking services from most UK banks. This goes against what the UK Treasury says they want, which is to encourage innovation in the cryptocurrency industry instead of stopping it.
A way ahead
We need to find ways to solve this problem, such as making a list of platforms that follow the rules set by UK regulators. These platforms would be allowed to freely exchange money with each other.
The UK government needs to take action like they did with Open Banking, to encourage competition and growth in the fintech sector. They should create rules for cryptocurrency that are based on principles and let the market decide. They also need to work on stopping high-street banks from putting extra barriers in front of cryptocurrency businesses.
There is a regulation called Regulation 105 that makes banks give access to payment services providers. This regulation has encouraged innovation in the payment industry. A similar approach could be used for cryptocurrency regulation to help the UK achieve its goals for the industry.
Bring crypto into the fold
The UK Treasury wants to bring cryptocurrency exchanges under financial services regulations for the first time. This is a good thing for both crypto challengers and traditional banks. Banks should focus on transforming their services in innovative ways, including providing services to crypto businesses.
To achieve its goal of becoming a leading capital market, the UK needs cooperation between traditional banks and crypto businesses. They should work together to create a well-regulated and technologically advanced financial system.
Su works as the Director of Operations for CryptoUK, which is an organization representing the UK’s crypto industry. She partners with other industry bodies to coordinate public policy positions globally. Su has experience in Marketing, Communications, Community Programmes and Event Management, working in finance, fintech, challenger banks, and crypto. Her roles included implementing launch programs for start-up tech businesses on a global scale.
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