Barclays has stopped providing banking services to Coinbase. The reasons for ending of the relationship between one of Britain’s premier banks and North America’s largest cryptocurrency exchange are unclear.
However, a Coindesk report states that Barclays developed “cold feet” over the risk involved in associating with cryptocurrencies. The same report also quotes another source as saying that the relationship was merely a pilot program which had ended.
The End of a Short-Lived Relationship
The relationship between Barclays and Coinbase began on March 2018 when the exchange decided to expand its operations in Europe. By August 2018, users at the exchange were able to buy and sell crypto using the Sterling Pound.
The fiat rails helped with ease-of-access to the exchange and cryptocurrencies for UK customers. Barclays also provided Coinbase with access to the Faster Payments Service (FPS), an initiative for payment transfers. With FPS, users can receive payments instantly or in less than two hours.
The CEO of a crypto company told Coindesk that Barclays’ risk appetite had contracted. “I’m not sure exactly why or what’s been driving that, maybe there has been some activity they are not happy with. But it’s about Barclays’ comfort level with crypto as a whole,” they said.
While Coinbase is out from Barclays customer list, wallet provider Blockchain is still in. The UK-based company, which launched a cryptocurrency exchange last month, boasts the largest number of cryptocurrency wallets on a single platform.
Crypto’s Banking Problems
In general, crypto-based businesses and startups have found it difficult to find banking service providers. This is primarily due to the risk and regulatory uncertainty associated with the industry throughout the world. The status of cryptocurrencies as legal tender or as an investment class is still unclear for the most part. Volatile crypto markets, which routinely crash or skyrocket in double-digit percentages, have added to the risks inherent in the system. The proliferation of scams and unethical practices have further dented the industry’s reputation. For example, Wells Fargo ended the banking relationship between one of its subsidiaries and crypto exchange BitFinex, sending the latter on a years-long search for banking providers.
But Coinbase already has replacements lined up for Barclays. It is working with ClearBank, which is emerging as a favored choice among UK-based crypto businesses, and LHV, an Estonia-based bank. ClearBank plans to offer FPS to its customers by the end of third quarter this year.
The current development has occurred days after Coinbase announced that it would no longer support zCash for its UK customers. The Coindesk report claims that Coinbase terminated the relationship because ClearBank was uncomfortable with zCash’s privacy features, which may run afoul of AML and KYC laws.