Lawmakers warn banks refusing crypto clients could paralyze UK market growth

Around 40% of domestic crypto transfers are currently delayed or outrightly rejected by British banks. Moreover, four-fifths of exchanges have seen an increase in the number of blocked transactions over the past 12 months.

Some lawmakers are now questioning the trend. They have cautioned that high-street banks refusing crypto clients could potentially paralyze UK market growth. 

So far, leaders of the UK’s crypto and digital assets parliamentary group have called on British banks to explain their stance toward digital asset businesses after multiple reports of crypto firms struggling to obtain bank accounts.

For some time now, crypto executives have also been protesting that financial institutions are shutting out legitimate digital asset businesses, even when those firms are properly registered and comply with existing rules.

In June, Stand With Crypto UK even mobilized its 286,000 members to challenge British retail banks over the blanket restrictions on crypto transactions. 

The UK government had earlier called for fair treatment of crypto providers.

Earlier in July, the UK Parliament’s cross-party group for digital assets opened a probe to scrutinize how mainstream lenders block accounts and restrict transactions for digital asset firms. At the time, the group insisted, “Access to banking services is fundamental for any legitimate business, and where unnecessary barriers exist they have the potential to hinder growth, investment and innovation.”

Still, the group maintains that stance. More recently, the Parliamentary crypto and digital assets group co-chairs Lord Vaizey and Gurinder Singh Josan MP argued that banks are stunting the UK crypto boom by locking crypto companies out.

They also warned that the banks’ restrictions risk compromising the effectiveness of the UK’s upcoming regulatory framework for crypto. As things stand, the UK digital asset industry is preparing to welcome more regulations from October 2027. 

Some bank executives have defended their actions, arguing that the measures are necessary to shield customers from rising crypto scams and the risk of significant losses due to price volatility.

Primarily, the Financial Conduct Authority (FCA) has stepped up its warnings about crypto risks in recent months, adding to banks’ concerns about facing major penalties for inadvertently enabling illegal financial activity. 

At the beginning of the year, a spokesperson for HM Treasury, the country’s economic and financial ministry, had said that the government expected banks to deal fairly with all businesses in the crypto sector, including licensed firms, and not to restrict services to licensed firms.

Banking restrictions could undermine the UK’s crypto ambitions

The restrictions are also raising questions about whether the UK can attract digital asset companies while they struggle to access basic banking services.

The issue could become more significant as the government introduces a clearer regulatory framework for digital assets. Lawmakers and industry representatives argue that continued banking restrictions could make it harder for legitimate crypto businesses to scale and weaken the UK’s position as a global digital asset hub.

Some are concerned about the political shift in the UK

Meanwhile, Andy Burnham of the Labor Party recently assumed the role of Prime Minister. But some are worried his regime may not prioritize the fintech or digital asset industry. 

Burnham has already indicated his intention to discontinue the digital ID project and instead focus on providing economic assistance to citizens, which has prompted various reactions. However, Jonathan Herbst of Norton Rose Fulbright has assured the nation that the Chancellor will implement stable financial reforms.

For international companies, the UK’s attractiveness is at least in part because of the stability of the regulatory environment; therefore, capital markets, fintech, digital assets, and sustainable finance will continue to be important tests of that commitment,” he said.

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