Banco Santander (LSE:BNC) is ready to block all UK customers from sending real-time payments to cryptocurrency exchanges as part of measures to protect customers from scams, according to an emailed statement.
Starting from November 15, payments to crypto exchanges will be limited to £1,000 per transaction with a total limit of £3,000 in any rolling 30-day period.
Following that, all real-time payments to crypto exchanges will be banned from an unspecified point in 2023.
The ban will be enforced by tracking transfers made between UK bank accounts and crypto exchanges on Faster Payments, the infrastructure used for electronic payments.
Banks double down on crypto bans
Banning payments to crypto exchanges is nothing new for the Spanish multinational bank; Santander continues to ban payments to Caymans-registered Binance (the world’s largest crypto exchange by volume) ever since the Financial Conduct Authority (FCA) prohibited it from undertaking regulated activity in June, 2021.
But not all cryptocurrency exchanges are registered in far-flung Caribbean islands.
Bitstamp is a UK-registered, regulated exchange catering to institutional investors with robust know-you-customer (KYC) procedures in place.
A number of other crypto exchanges are also registered with the FCA, including the Winklevoss Twins-owned Gemini exchange, CoinJar, and hybrid exchange eToro.
Crypto.com gained regulatory approval from the FCA in August.
(For clarity, registering with the FCA does not bring these exchanges’ activities under the purview of the FCA, nor does it give customers access to the Financial Services Compensation Scheme.)
Santander’s announcement does not seem to offer much in the way of nuance; does the bank intend to treat all exchanges equally, or will concessions be made for firms with more stringent safety checks?
Proactive has reached out for clarity, but in the meantime, it follows a clear trend of UK-based banks erring on the side of caution when it comes to digital currencies.
In 2021, Britain’s largest bank HSBC went as far as banning clients from purchasing stocks in crypto-adjacent companies such as Coinbase and MicroStrategy.
In fairness, that was more of a blessing than a curse, given the trajectory of those companies’ market valuations.
“HSBC has no appetite for direct exposure to virtual currencies and limited appetite to facilitate products or securities that derive their value from virtual currencies. This is not a new policy,” HSBC corporate media relations manager Ankit Patel told Coindesk in April.
In that same month, NatWest began refusing to serve business customers who accept payment in cryptocurrencies, including bitcoin.
“We have no appetite for dealing with customers, whether taking them on as new clients or having an ongoing relationship with people, whose main business is backed by an exchange for cryptocurrencies or otherwise transacting in cryptocurrencies as their main activity,” said Morten Friis, a NatWest board member and head of its risk committee.
But even NatWest takes a more balanced approach to the outright ban announced by Santander.
“If you're making a payment to a cryptocurrency exchange where a high volume of scams has been reported to us, your payment may be declined,” goes the official party line.
Rifts emerge between banks and the government
This level of animosity sits in stark contrast to the pro-crypto sentiment emerging from prime minister Rishi Sunak, who apparently wants to make the UK “a global hub for cryptoasset technology and investment”.
Though as previously discussed in Proactive, Sunak’s pro-crypto regulatory approach could be more about controlling the decentralised economy than his rhetoric firsts suggests.
None of this is to say caution isn’t justified.
Cryptoasset scams reported to the FCA doubled in 2021, according to research conducted by Capital Block.
Proliferating crypto scams, coupled with the US$2tn market rout of 2022, make for a toxic, dangerous mix for investors, but one wonders if targeting the exchanges is the best way to go about enhancing customer safety.
Making it harder for people to interact with centralised, (at least partially) regulated exchanges will only force them to the dark underbelly that is decentralised finance (DeFi).
These DeFi platforms, which have no middleman, no oversight, and certainly no KYC and anti-money laundering policies, represent far greater risks than their centralised counterparts.
Besides, is this full-blown animosity emerging from the tradition financial institutions really conducive to making Britain a global crypto hub?
Maybe that’s the point.