Central banks in the United Kingdom are giving a big fat “no” to cryptocurrency startups. This is causing many crypto companies to move to more welcoming places in Europe such as Gibraltar, Poland, and Bulgaria.
While the government of the UK has had a generally positive stance on accepting blockchain technologies and crypto startups, the private banking sector sees it all in a different way. This comes from a number of reasons, but the main reason being FUD: Fear, Uncertainty, and Disillusionment.
A lot is to be speculated in the crypto world. The market value of crypto has skyrocketed in the last six months from $30bn to $160bn. As the first big boom to happen completely on the internet, production is happening at an exponentially rapid rate and makes it complicated for anyone who isn’t keeping up with news to understand what is going on.
And then the only things people on the outside hear are about price flux and the “dark web.” And a strong emphasis on “dark web.” Bitcoin has been made famous by all of the criminals who use the technology to buy and sell illegal goods on; the most popular marketplace being the Silk Road.
“When you look on the dark web, everything there is being paid for with cryptocurrencies,” said an anonymous UK banking boss. “You don’t know who is transferring money in and out. If cryptocurrency goes to Iran and we’re involved then I get shut down.”
Many bankers are feeling scared about not completely knowing what they are getting in to. The fact that there have been no regulatory actions taken in the UK regarding cryptocurrencies makes it a very volatile game to get involved in.
On top of that, Bitcoin and many cryptocurrencies have the intention of taking power away from centralized authority, primarily banks. OmiseGo, a cryptocurrency startup with the token OMG, is creating a digital wallet to hold all cryptocurrencies and act as a bank in your wallet. One of OMG’s goals is to “enable financial inclusion and disrupt existing institutions.” People could potentially hold all of their money in their OMG wallet, and even use it to take out loans. A lot of the power that banks have comes strictly from holding assets behind walls, and the decentralized nature of cryptocurrencies tends to take that away. Jamie Dimon knows very well about the destructive nature of cryptocurrencies and made his view clear on CNBC: “It’s creating something out of nothing that to me is worth nothing,” he said. “It will end badly.” Later on, he was told to by major Middle Eastern tech CEO Fadi Ghandour that he needs to learn about cryptocurrencies before talking about them.
But the voice of centralized banks is clear, especially in the UK. Michael Hudson of Bitstocks said that “It is almost an impossibility to get a UK bank account. We bank in Gibraltar and Poland — the two jurisdictions that are most stable. We had an account in Bulgaria but that didn’t last long.” This ends up disrupting a delicate process because borrowing money from foreign investors can scare clients away from a “volatile” business. Simple things like paying staff have become a complex situation to Bitstocks.
Although it is hard for many startups, it is not impossible. Barclays has a few crypto clients and HSBC is in talks with a few major clients. But it sounds like until solid regulation guidelines are in effect in the UK, startups may need to move around.