UK’s NatWest, PaySafe Distance From Crypto as Banks Roil

It’s part of the ongoing arms race between financial progressives and the incumbent banking system, one expert told Blockworks Tuesday

article-image

Source: Shutterstock / Alex Yeung, modified by Blockworks

share

In light of the regulatory environment surrounding digital assets, one of the UK’s largest consumer banks, NatWest has placed restrictions on customers sending money to crypto exchanges.

The bank said Tuesday its daily and monthly limits of $1,200 and $6,000 are based on a need to “help protect consumers losing life-changing sums of money,” the Financial Times reported. 

Paysafe, an online payments provider, has also announced it will wind down services to UK customers of Binance, the world’s largest crypto exchange by total volume.

The Binance provider of British pound deposit and withdrawal services terminated its services on Monday for new customers, with a full wind down for all UK users expected by late May.

NatWest and Paysafe represent a growing trend among financial institutions seeking to distance themselves from the nascent digital asset market following a tumultuous week for regional US banks.

Oliver von Landsberg-Sadie, founder of London-based digital asset financial services firm BCB Group, told Blockworks the decision can be viewed as “cryptophobia disguised as consumer protection.”

“It’s part of the ongoing arms race between financial progressives and the incumbent banking system,” he said. NatWest and Paysafe did not immediately respond to requests for comment.

Traditional versus digital

The recent collapse of Silicon Valley Bank, a prominent lender in the tech start-up scene, has caused panic, with some crypto executives and investors blaming centralized banking for the failure. 

They purport government regulators, who had recently cracked down on crypto firms, are responsible for the bank’s downfall in a type of financial crusade designed to curb the influence of digital assets.

The banking agencies’ actions, namely those coming from the Federal Deposit Insurance Corporation (FDIC), are likely to have serious and lasting consequences, Fireblocks’ chief legal and compliance officer, Jason Allegrante, told Blockworks.

“Signature Bank is an example of how far the banking agencies appear willing to go,” he said. “Unlike SVB, which had legitimate balance sheet issues, there was no apparent balance sheet or liquidity crisis at Signature at the moment it entered receivership.”

Silvergate Bank, which had assets worth $12 billion, initiated voluntary winding down procedures on March 8, following a period of uncertainty. Soon after, on March 10, SVB with assets worth $200 billion was placed under the receivership of the FDIC.

State regulators then ordered the closure of Signature Bank, which had $100 billion in assets, just two days later. All three banks were popular among cryptocurrency enthusiasts.

The blame game has also exposed the factionalism in the tech industry, where crises can be used to advance agendas.

“We’ve seen other banks like Santander and Lloyds impose similar limits but they will never outpace the innovation coming from the blockchain industry,” Landsberg-Sadie said.

One major lesson learned is that not all banks are held to the same regulatory framework as others, Ilya Volkov CEO of Swiss-based international fintech platform YouHodler told Blockworks in an email.

“Silicon Valley Bank was not subjected to the Liquidity Coverage Ratio (LCR) as banks are in Europe,” he said.

LCR refers to a regulatory requirement for banks to maintain enough high-quality liquid assets on hand to cover their short-term liquidity needs in case of any financial stress or crisis.

In the US, the LCR wasn’t applied to SVB as it wasn’t considered a large enough bank — even though it was the country’s 16th-largest, Volkov added.

“As a result, the Federal Reserve is sending a message. If you are not one of the ‘big four’ banks, then you play by a different set of rules with limited protection,” he said.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the On the Margin newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Salt Lake City, UT

MON - TUES, OCT. 7 - 8, 2024

Blockworks and Bankless in collaboration with buidlbox are excited to announce the second installment of the Permissionless Hackathon – taking place October 7-8 in Salt Lake City, Utah. We’ve partnered with buidlbox to bring together the brightest minds in crypto for […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Research Report Templates.png

Research

ZKPs enable efficient offchain transaction processing and validation, resulting in increased throughput and reduced fees. Solana's ZK Compression leverages ZKPs to minimize onchain storage costs, while Sui's zkLogin streamlines user onboarding by replacing complex key management with familiar OAuth credentials.

article-image

The crypto asset manager lowered its planned fee from 0.25% to 0.15%, undercutting its competitors

article-image

Plus, a look at planned ETH ETF fees and how they differ from their BTC counterparts

article-image

North Korea suspected in breach of Indian exchange’s multisig wallet

article-image

Plus, Sanctum’s CLOUD token has officially launched — but not without problems

article-image

It’s not yet clear whether Donald Trump is pumping bitcoin. But an unofficial memecoin is still seeing benefit.