In the wake of recent scandals in the sector, the Nationwide Building Society and HSBC Holding Plc have imposed restrictions on their retail clients’ access to crypto assets. It was HSBC, the largest bank in the UK, that came up with the restriction first.
The bank announced last month that their customers will not be able to use their credit cards to purchase crypto assets. Following the path taken by HSBC, the Nationwide Building Society has also put in place a new restriction in terms of crypto assets.
The bank imposed a restriction by putting a limit on the amount used to purchase crypto assets daily to £5,000, which is $5,965. The announcement about the regulation was made on Wednesday.
In their explanation of their new restrictions, the bank stated that it was to avoid any potential danger or loss to their clients.
Earlier, there was a statement by the Financial Conduct Authority (FCA) that stated that crypto assets were a very risky investment, and both the banks pointed out the statement as a driving force behind the newly implemented restrictions.
The FCA issued a warning about Binance, which is the largest cryptocurrency platform in the world by saying that the firm does not hold any authorization, registration, or any kind of license from the authorities to conduct regulated activities in the UK.
Just like the FCA, many different agencies in different countries like Malaysia, Japan, the Cayman Islands, Hong Kong, Lithuania, Germany, and Thailand have also issued similar warnings about the cryptocurrency platform Binance.
HSBC and Nationwide Building Society are not the first banking firms in the UK to impose restrictions on their clients in association with crypto assets and investments.
Recently as there was much news about the scandals in the sectors, other major firms like Lloyds Banking Group Plc, Natwest Group Plc, and Banco Santander SA have also brought in new rules and regulations that have limited their customer’s use of cryptocurrencies and also their involvement in crypto assets and investments.
The majority of the firms that restricted the use of cryptocurrencies for their clients were also very particular about the limitations on exchange with crypto holding firms with Binance Holdings Ltd, the largest cryptocurrency platform in the world being the major target.
The HSBC Bank had been holding its ground in its policies against crypto assets and investments. The bank changed its crypto policy to bar clients that stopped them from buying stocks of companies that hold bitcoin in April.
Buying stocks in firms like Microstrategy, which holds more than 100k BTC, now was not supported by the company.
In light of the events that took place in the crypto sector, the CEO of HSBC Bank, Noel Quinn made it clear that the bank was firm in its decision against crypto assets and that there will never be a cryptocurrency trading desk at the firm.
He also added that HSBC bank is strictly against and has no plans to offer cryptocurrencies as investments to their customers.
The major event that initiated the restrictions and bans on crypto assets was the fall of FTX, the world’s largest cryptocurrency exchange platform, in November 2022. With the collapse of the FTX, warnings about the potential risks and their after-effects emerged.
Agencies like the International Monetary Fund, Financial Action Task Force, and the Financial Stability Board have asked the banks to safeguard themselves from the potential crypto risks and also not to expose the conventional banking financial system to the dangers posed by crypto assets.
The restrictions imposed by the major banks in the UK also seem to have had an effect on other banks which are crypto-friendly and support the concept.
For instance, Silvergate Capital Corp, which is a leading bank that supports crypto innovations, sank to a record low on Thursday after they stated that the firm was reviewing whether they could remain viable.
Not only in the UK, but all over the world, financial institutions have become more vigilant of the activities of crypto-firms due to their potential risk and the lack of regulations in the sector. Recently, there was news about the plans to ban crypto staking in the United States by the authorities.
As the crypto firms handled massive amounts of money and operated under very few restrictions, the threat that they pose to the customers who invested in them is very high. The massive collapse of FTX has triggered authorities to be more vigilant about such firms.
In the United States, there were arguments and debates where a section wanted the Securities and Exchange Commission to excerpt a certain authority over the sector and to bring in new regulations in processes like crypto staking.
As the proposal made it to a public platform, they were met with huge opposition from people like Brian Armstrong, who is the CEO of Coinbase which is an American publicly traded company that offers services like buying, selling, transferring, and storing cryptocurrency.