The United Kingdom has been highly vocal about its desire to become a global hub for cryptocurrency and digital assets. However, a significant roadblock is standing in the way of that vision: traditional banks. In response to mounting industry complaints, the UK’s Crypto and Digital Assets All-Party Parliamentary Group (APPG) has officially launched an inquiry to determine if crypto businesses and everyday consumers are facing unfair barriers when trying to access basic banking services and execute crypto-related transactions.
The High Cost of Blocked Crypto Transactions
Stakeholders, including payment providers and crypto firms, have until August 31 to submit their written experiences to the APPG, but the underlying tension is already well-documented. According to a recent survey by the UK Cryptoasset Business Council (UKCBC), traditional banks have delayed or outright blocked up to 40% of transactions destined for crypto platforms. This hostility is taking a massive financial toll. In fact, one unnamed exchange reported nearly £1 billion—roughly $1.35 billion—in declined bank transfers and rejected card payments over a single year.
The root of this friction largely stems from a highly cautious banking sector, driven by the UK’s authorized push payment (APP) fraud rules. Under these regulations, payment providers are generally required to reimburse eligible fraud victims up to £85,000 per claim. This creates a strong financial incentive for banks to employ blanket bans and fixed transaction caps on crypto-linked transactions, rather than taking the time to individually assess them. As a result, seven out of ten surveyed crypto firms—including major players like Coinbase, Kraken, and Gemini—admitted that these banking restrictions are actively reducing their willingness to hire, invest, or expand operations within the UK.
Will Regulatory Licensing Solve the Banking Divide?
This parliamentary probe comes at a critical time for the UK crypto industry. Starting September 30, the Financial Conduct Authority (FCA) will begin accepting authorization applications from crypto firms. This is a major stepping stone ahead of the full regulatory regime drafted by HM Treasury, which is expected to take effect in October 2027. However, industry experts are quick to point out that simply handing out government licenses won’t magically fix the underlying banking blockade if traditional financial institutions refuse to play ball.
Yuriy Brisov, a partner at the London-based consultancy Digital & Analogue Partners, highlights the growing contradiction in the government’s approach. While acknowledging that banks have a legitimate duty to prevent money laundering, Brisov argues that current banking controls fail the basic test of proportionality because they do not distinguish between high-risk, unlicensed offshore platforms and strictly regulated UK exchanges. He points out that once a firm is officially licensed by the FCA, banks can no longer claim its risk profile is unknowable. Ultimately, a country cannot legitimately call itself a global crypto hub while actively keeping its payment systems closed to the very industry it regulates and licenses.
