Cryptopay, a successful Bitcoin brokerage with more than 200,000 active users worldwide, has exited the UK market due to pressures of a banking policy update on February 1, 2017, that prevents British Sterling (GBP) deposits and withdrawals.
Cryptopay, the Latest Casualty in the UK’s Bitcoin Ecosystem
Ever since bitcoin has come into existence users have been faced with the difficulties of converting their digital currency into Sterling. Cryptopay provides their customers with a bitcoin debit card to create a simpler and more efficient way of using the cryptocurrency for deposits and withdrawals, much like a bank would with fiat currency.
While the UK government is a staunch supporter of blockchain technology, some commercial banks globally have pushed out bitcoin exchanges preventing withdrawal facilities. Along with the individual cases that have been impacted by the disapproval of bitcoin activity, updated policies of banks are enforced to protect themselves further, pushing out firms associated with bitcoin such as Cryptopay. According to a recent email to their clients, the business has been completely shut down in the UK due to a newly-implemented bank policy:
“I regret to inform you that starting from 1st February, British Pound deposits and withdrawals are no longer supported by Cryptopay due to updated bank policies.”
Cryptopay is simply one example, there is no doubt that many other British bitcoin companies have been hindered or completely gone out of business due to the withdrawal of their banking facilities. With Cryptopay gone, there are few other GBP debit card service users can choose from that are reliable and cost effective such as Wirex and Xapo.
BTCManager reached out to Wirex founder Pavel Matveev, who suggests the clampdown of some bitcoin companies by banks is based purely on regulation:
"I can confirm that the situation with bank accounts is far better than it was two or three years ago. Cryptopay has been accepting deposits into it's own bank account, which is illegal, so the bank's decision looks reasonable to me. If a company is not involved in money laundering and comply with all regulations, it won't have a problem with UK banks."
As liberalizing as the innovation of bitcoin may be, the growing number of users and acceptance of this payment method clearly stands as a threat to many commercial banks; they demonstrate their disapproval through discouraging customers and businesses with little or no notification before closing their accounts.
Individual Bitcoiners, as well as Companies, are Targets
Take the case of Charles Bartlett, a Barclays customer who conducted bitcoin trades,which resulted in his bank account being closed instantly without being given any warning. Barclays responded very aggressively to the bitcoin trading activity as they informed Charles Bartlett a week later that he was no longer welcome to hold a bank account with them. At that moment his account was frozen, and he was unable to access his funds. However, following an internal investigation that was led within Barclays, Bartlett's funds were then released.
Barclays, while perhaps the worst offender in the UK, was not the only bank to respond so harshly to bitcoin transactions. It was reported that Lloyds also behaved in the same manner in early 2016. As the customer stated on Reddit, their bank account was suspended due to buying bitcoin without receiving any correspondence as to why this course of action had taken place.
The victimization of Bitcoin users is not limited only to individuals in the UK. Firms such as CoinJournal reported in October 2016 that bitcoin activity resulted in suspension of their account, with no explanation or warning. Again, the culprit was Barclays. Oliver Carding, the founder of CoinJournal, explained that he was shocked that Barclay’s viewed the bitcoin activity on their account as a threat and was not given a clear cut explanation as to why the account was closed:
“Considering the size of our business… and the amount of money involved, we are surprised that we’ve been considered high risk. When asked for more information about which rule we’d broken they would not give us explicit information and referred us to their terms and conditions.”
Trading Outside the Banking System
Now a way around such stagnation of the mainstream’s acceptance of cutting-edge financial innovation is evidently the use of peer-to-peer trading services such as LocalBitcoins, which has seen its popularity surge in the UK, or Mycelium’s built-in marketplace. Instead of using exchanges such as Cryptopay, firms and individuals can engage in an array of peer to peer services that bridge together the buyers and sellers of bitcoin to enable exchanges for GBP.
How this particular system works is through individuals establishing a trusted reputation through feedback of the service provided. After the payment is made by the buyer, then a bank or cash transfer is made to the seller, who then sends the bitcoin. Essentially this works around the issues of centralized firms being closed down by the banking industry.
Nevertheless, there remains a social upheaval that impacts bitcoin businesses in the UK negatively, whether this is faced by many individuals or bitcoin exchanges being marginalized by the banks. Bitcoin enthusiasts or users are advised on popular sites to avoid disclosing any reference to bitcoin in fear of being excluded from using banking services.
Sidestepping Banks by Encouraging Adoption
Although commercial banks are reluctant and averse to the financial innovation of bitcoin, they are likely to be forced to be led by the change of bitcoin usage as growing public interest and acceptance takes place. Now one challenge the commercial banks face is an attempt to overcome their disapproval of bitcoin activity through a rapid increase in the acceptance of bitcoin payments by individuals and businesses, thereby reducing the need to convert into GBP.
Small and medium-sized enterprises (SME’s) affected by the banking sector’s arrogance and aggression should take the charge, and widen the acceptance of bitcoin and the ecosystem underlying it. Majority taxpayer-owned bank RBS drove small businesses to the edge during the financial crisis to boost their own profits, stripping companies of their assets. SME’s should stand up to the oligopolists and fight back by participating in a growing economy backed by the world’s most valuable cryptocurrency.
Entrepreneurs who believe in the vision of bitcoin, that is individual financial autonomy, should start to accept and promote bitcoin as a method of payment. A physical market where you can buy everyday goods and groceries solely with bitcoin would be a good start to this movement too and hopefully, inspire others to spring up. A long-term strategy for sidestepping the British banking sector relies on greater adoption otherwise, bitcoiners will remain under the thumb of bankers.
This article was updated February 20, 2017.