Two years ago, JPMorgan launched its Chase retail bank mobile app in Britain, amassing over 1.6 million customers during this time. However, on 26 September 2023, Chase UK made the decision to ban cryptocurrency purchases due to a fear of fraud. We reached out to the industry to find out how detrimental this will be for the UK crypto scene and what the future holds.
According to research from Action Fraud, crypto fraud in the UK has surpassed £300million for the first time, as there has been 41 per cent year-on-year growth. This has been the driving factor behind Chase UK’s decision to ban digital currency purchases from its platform, which will take effect from 16 October.
Chase is not the first UK bank to make a decision against cryptocurrencies. For example, Lloyds Bank users cannot use credit cards to purchase cryptocurrencies. Charlie Nunn, CEO of Lloyds Bank has said: “I don’t think Lloyds Banking Group will want to be promoting cryptocurrencies, but we do want to make sure that, if our customers choose to put money into cryptocurrencies, it’s as safe as can be.”
NatWest has taken a similar approach. It has set limitations on crypto spending for its customers. In March, NatWest said its customers can only make up to £1000 worth of crypto payments per day and £5000 in a 30-day period.
Outright ban – not a limitation
These methods from the other banks set a strong precedent for crypto limitation, but an outright ban is somewhat surprising. Alongside fraud, one reason for the ban could be regulatory struggles according to Shivendu Shivendu, professor of information systems at University of South Florida.
He explains that the crypto industry’s inability to self-regulate, a lack of unanimous regulation from regulators and of course, the bad press surrounding fraud all lead to a loss of consumer trust. “An outright ban is a reflection of extreme downside risk to financial firms by letting customers continue to transact in crypto without any perceptible upside.”
Cryptocurrency’s trust has recently been called into question following the Financial Conduct Authority‘s (FCAs) marketing transparency regulations. This move by Chase further emphasises the idea that cryptocurrencies are untrustworthy. This begs the question, was the move too harsh?
According to Mriganka Pattnaik, CEO at Merkle Science: “The spirit behind Chase’s decision is correct. It moved to prohibit Chase customers from buying cryptocurrency or transferring money to a cryptocurrency website for two principal reasons. The first is that cryptocurrency-related scams targeting UK customers are indeed spiralling out of control. The second is that if a person were indeed to fall victim to such a scam, the chances of recovering the assets are unfortunately low.”
Pattnaik also notes that users who know how to use crypto will likely just go to another institution where “Chase will have no liability or exposure.”
Ultimately though, it depends on the individual. For those new to the crypto scene, the move can provide reassurance. However, for those well-versed in it, the move will probably feel like a kick in the teeth.
This is further highlighted by David Janczewski, CEO of Blockchain protection company, CoinCover: “Instead of banning all crypto-related activity, which may ultimately cause customers to leave, it is possible to prevent theft and loss by introducing more robust safety measures which can tackle these issues at source.”
So what’s next?
Time will tell how cryptocurrencies are able to recover from the continued bad press. However, despite its transparency being called into question, crypto adoption still remains high. Crypto regulations discussions are further accelerating adoption too.
Daniel Seely, financial services lawyer at national law firm Freeths suggests we could see a new wave of challenger banks – crypto challengers.
“It is unsurprising that banks remain cautious about approving customer transactions involving crypto, given the various issues that the crypto world has encountered in the last year or so – the industry is still grappling from the fallout of the collapse of FTX, which saw millions of customers lose money. In many cases, banks may be concerned about the potential legal action they may face from customers if crypto investments and purchases go wrong.
“What we may see in time is a small number of ‘challenger’ banks emerge which begin to break away from the crowd and become more receptive towards the use of crypto and which targets new customers who want to get into that space. If that succeeds, and if those transactions can take place in a stable way and continue to do so, it may mean that the larger and more ‘traditional’ banks may follow suit.”