UK crypto ‘debanking’ is getting worse, lobby group warns in damning report

The UK Cryptoasset Business Council is calling for clearer regulatory guidance after it found a sharp rise in crypto exchange customers experiencing blocked or limited transfers over the past year.

The group, which lobbies the government on behalf of UK crypto companies, surveyed the UK’s ten largest crypto exchanges, including Coinbase, Kraken, OKX, and Gemini.

80% of respondents said an increasing number of their customers reported having bank transfers blocked or limited, while 70% said the UK banking environment is becoming more hostile.

“Blanket restrictions from the bank are designed to constrain the growth of the crypto industry,” an unnamed crypto exchange said in the report.

“No consideration of our regulatory status, actual fraud levels or genuine risks have been taken into account.”

For years, the UK has lagged behind other countries in regulating the fast-moving crypto industry.

But there are signs that this is beginning to change.

Last month, Rachel Reeves, the UK’s Chancellor of the Exchequer, revealed the Treasury was busy devising clear rules of the road for the digital assets industry.

At the same time, the Financial Conduct Authority, the UK’s regulatory watchdog, announced that a set of rules for stablecoins pegged to the value of the British pound will be a major priority moving forward.

£1 billion declined

According to the Business Council’s report, one exchange observed close to £1 billion in declined transactions attributable to bank-side rejections in the UK over the past year.

Based on the findings, the council estimates that 40% of all transactions to crypto exchanges are either blocked or delayed by banks.

It’s not just crypto exchange customers who are potentially losing out.

A majority of the exchanges that responded to the survey said that the increasingly hostile environment towards crypto in the UK is reducing their appetite to invest, scale, and hire in the country.

“We need support. If we are registered with the FCA it should not be this challenging for UK businesses,” another unnamed crypto exchange said.

The report also offers several policy recommendations to address the debanking drama.

They include having the FCA require banks to recognise the differences between exchanges and take a case-by-case approach to restrictions, creating a forum for engagement that brings together policymakers, platforms and banks to address fraud, and requiring banks to remove unnecessary frictions for FCA-registered exchanges.

Implementation of the recommendations would reduce the risk of innovation being offshored and ensure the UK can fully capitalise on the forthcoming regulatory framework, the report said.

“The window for action is now.”

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at [email protected].