Britain says it wants to be a global hub for digital assets. Yet many people who want to use a lawful, FCA-registered crypto service cannot reliably move their own money to one. This is a test of whether the UK believes in individuals’ freedom to control their own money.
A growing number of banks now block or cap transfers to crypto platforms. Some impose limits; others refuse payment altogether. These restrictions are applied across the sector without distinguishing between an offshore operator and a platform registered with the Financial Conduct Authority.
Banks should not be able to frustrate a national objective on financial innovation by acting as gatekeepers to those platforms
Starling says crypto ‘can result in devastating customer losses’. In fact, Bitcoin and Eth (the native token of the Ethereum blockchain) have similar levels of volatility as mid cap equities, and the top 20 crypto assets by market cap have levels of volatility equivalent to US tech stocks. Even despite the recent downturn, Bitcoin is the best performing asset of the last decade.
Some of the banks’ concerns are legitimate; scams and frauds must be taken seriously. And since October 2024, banks have carried mandatory reimbursement liability for authorised push payment fraud for in scope payments, so a degree of caution is understandable.
Cryptoasset exchanges are ready to work with banks to identify and disrupt fraud. Yet meaningful cooperation and data-sharing has not been forthcoming. That is a missed opportunity to tackle fraud and scams while avoiding blunt restrictions that block legitimate customers and firms.
A blanket ban is not the same as reasonable risk management. It is the financial equivalent of closing an entire road because some drivers speed. It protects institutions, not necessarily customers. Indeed, it can push people towards less transparent routes, unregistered providers or informal workarounds that are harder for banks and regulators to monitor.
The scale of the problem should command attention. A January survey of 10 major UK crypto exchanges found that 40% of transfers from UK bank accounts were blocked or delayed, while 80% of respondents said the problem had worsened over the previous year. This is a structural barrier to participation in a legal market, and is making the UK an outlier internationally.
It is also a competition problem. Banks are not neutral pipes when they decide that customers may use their money for one lawful financial service but not another. The concern is sharper when institutions that restrict access to external crypto platforms are simultaneously exploring crypto products themselves. Regulators should not allow control over payment rails to become a substitute for regulation.
Today’s announcement that the Government plans to give the Bank of England a new statutory objective to support innovation in payment systems and digital money is welcome. It is a clear signal of Britain’s ambition to lead in digital markets – and of the expectation that regulators should help deliver that ambition. If stablecoins and tokenised assets are to become part of the UK’s financial system, individuals must be able to engage with innovative firms building these services, including cryptoasset exchanges. Banks should not be able to frustrate a national objective on financial innovation by acting as gatekeepers to those platforms.
The UK’s forthcoming crypto regime makes this even more urgent to address. From October 2027, firms will need FCA authorisation under the UK’s framework. The regulator says the regime is intended to support an open, sustainable and competitive market, but that relies on accessible and reliable on-ramps into the crypto sector.
The FCA has already advised that an entire sector should not be treated as a single risk category. Services may look similar on paper but carry very different risks in practice. Blanket, pre-emptive bans are blunt instruments that block legitimate activity, and are not a substitute for the risk-sensitive approach that banks apply to other types of payment.
Banks should retain the ability to refuse specific transactions, or require enhanced checks when this is justified by unacceptable risk. But restrictions should be proportionate, transparent and based on the customer, transaction and recipient.
The banks must be held to account. Sector-wide blocks are not an acceptable substitute for case-by-case assessment, particularly where payments are destined for authorised or registered firms. Banks, in turn, should work with crypto asset exchanges to identify suspicious behaviour rather than suppressing lawful choice, and choking off an entire sector.
If Britain wants the benefits of digital finance, it must permit people to access it. A country cannot credibly invite innovators in while allowing its banks to lock consumers out.
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