Crypto bosses step up calls for regulation amid bank ‘bashing’ | Fintech time
Crypto bosses have stepped up calls for strong industry regulation as the embattled sector fends off blows from street banks.
While large financial institutions like JP Morgan, Standard Chartered and Town have recently made significant investments in crypto, the big banks have been somewhat apathetic about the virtues of the crypto world.
But now, in the midst of a crypto winter, that apathy seems to be turning into antipathy towards crypto.
Lloyds, Barclays, RBS and neobank Starling are among those banks that have all restricted crypto investments. This includes blocking credit card transactions and blocking bank transfers with crypto exchanges.
With nearly 50% of UK banks not allowing their customers to transact with crypto exchanges, crypto bosses feel under siege.
The ban raises multiple questions
Undoubtedly another blow to the crypto industry, the decision to block crypto activity also raises other issues, such as questions about customer freedom of choice; whether banks are guilty of double standards, as well as raising the voice of crypto regulation.
amanda shoffelmanaging director and chief compliance officer at crypto exchange Bitstamp United Kingdom, said: “Until the UK makes vital regulatory developments, we will continue to see this trend of traditional banks turning away from digital assets and enforcing the so-called crypto crackdown.”
Security controls not robust enough
By this strike against crypto, banks are actually saying that crypto exchanges do not have strong enough security controls to prevent criminals from using them for fraudulent purposes, a claim denied by crypto companies.
Crypto firms say they are tarred with the same brush as a few rogue actors.
Some of the banks’ public statements have been combative. For example, Starling said cryptocurrencies are “widely used for criminal purposes.”
But there is no doubt that banks have cause for concern, a fact recognized by the crypto industry, which fails to offer consumer protection against scams due to lack of regulation.
In June of last year, the Financial Conduct Authority banned Binancethe world’s largest crypto exchange by trading volume, to operate in the UK for failing to meet regulatory requirements, marking the latest sign of a crypto crackdown.
Crypto Scams on the Rise
Meanwhile, research by a crypto consulting firm capital block shows that crypto scams reported to the FCA more than doubled in 2021, with the regulator receiving 6,372 scam reports in 2021, up from 3,143 the previous year. In 2017, the FCA received no complaints
But Capital Block stresses that the increase is not surprising given the “relative nascence of the sector”.
“Until the UK makes vital regulatory developments, we will continue to see this trend of traditional banks turning away from digital assets and enforcing the so-called crypto crackdown”
Blanket ban fails on behalf of banks
While crypto bosses understand banks’ concern over scams, they believe such “brutal measures” blocking transfers and transactions are overkill.
Jamie McNaughtfounder and CEO, Solidi, an FCA-regulated crypto exchange, says it understands banks’ concerns, but it says imposing such a blanket ban is a failure of banks’ own controls that will bite them on the butt and lose them customers.
He said: “Customers see it for what it is, which is banks saying ‘you can’t do what you want with your money’.
“Banks have taken a pretty hard-nosed approach and a pretty lazy approach.”
There are no incidents of fraud in transactions between Starling and Solidi, but it is under a blanket ban, he pointed out.
More measured approach
McNaught says more measured alternatives for banks would be the widespread use of 24-hour cooling-off periods so transactions can be reversed to help prevent fraud.
He also thinks that in some cases some customers might need additional restrictions on their accounts to protect them.
Regarding the impact of the ban on Solidi, McNaught says there has been an increase in support calls from customers frustrated by the bank ban. He said the exchange would see a decline in revenue.
On a positive note, he hopes Solidi can strike a deal with a more crypto-friendly bank like Monzo, so customers can be referred.
Like McNaught, Tim Mangall, CEO, Capital Sports Media and Capital Blockprotests against the brutal approach adopted by the banks.
He says young people who want access to cryptocurrencies will ditch Starling and switch to more crypto-friendly neobanks like Monzo and Revolution.
He says that instead of a blanket ban, educating customers about crypto volatility and limits on one-time transactions are more measured actions.
No blocking on gambling sites
By way of comparison, he points out that banks have not blocked customers’ access to gambling websites, which he says is a more dangerous financial risk for customers.
He says: “Yes, cryptocurrencies are used by criminals, but so are the British Pound, Dollar, Yen and Euro which flood many traditional banks.”
Banks accused of double standards
Crypto bosses have also suggested that banks could be accused of double standards, given their own interests in the region.
Many high street banks have valued the rich rewards offered by crypto as both an investment and trading opportunity, similar to US banks.
If they are so anti-crypto, then they should get out of crypto interests altogether, they say.
Strong calls for regulation and collaboration
Experts say the banking bloc, as well as the much publicized crash of FTX (one of the largest crypto exchanges in the world) and a liquidity crisis in the industry, have highlighted the need for regulation in the UK more than ever.
Dan Moczulski, British MD at eTorocrypto trading platforms, said: “Once we have a robust regulatory system in place, we will have a framework in which all parties can operate, providing certainty for responsible banks, consumers and platforms offering crypto.
“We seem to be making some ground on this with the government’s Financial Services and Markets Bill and it can’t happen soon enough.”
Shoffel adds, “In order to mainstream crypto over the next decade and help stabilize coins, the industry needs to collaborate with both the financial industry and government regulators.
Embrace Crypto Like Europe
“Ultimately, if the UK wants to embrace crypto like its European neighbors, it will have to take the necessary regulatory steps to do so.”
Kate Anderson, which specializes in fintech Searcher, the personal finance platform, said, “I think there is a feeling among the crypto community that regulation could promote more engagement. I think banks are always trying to integrate cryptocurrencies into their services.
She adds, “There are a lot of moving parts in the crypto industry. I obviously think there have been crypto winters before, they [the crypto industry] have been there. It could be similar to the dot.com crash, where you whistle bad actors.
Crypto based on reinvention
The crypto bosses are keen to sit down with the bank bosses to come to a resolution that works for both parties, but it seems that for now at least the banks are less enthusiastic and want to play hardball.
But crypto bosses point out that the industry is all about reinvention and has already overcome major challenges. Perhaps as will be the case in the case of his feud with the big bank?
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