After Barclays allegedly cut ties with cryptocurrency exchange Coinbase, rumours spread that Spanish bank Santander had followed suit.
However, a Santander UK spokesperson denied it was blocking payment to Coinbase and told FinTech Global, “We do not block payments to any legitimate company, however in certain circumstances we will refer payments for additional security checks, where we believe there may be a higher risk of fraud.”
The rumours have been tracked back to a post on Reddit. A user had posted on Wednesday August 14, writing, “Just got off the phone with a Santander rep in the U.K, who informed me they will no longer be allowing their customers to deposit money to Coinbase. After I put in a complaint their ‘complaints department’ confirmed to me that I should move to an alternative bank if I wish to make the payment. They went on to say this is likely because of an increase in fraud related to Coinbase.”
These reports spread quickly over the following hours with several news sites reporting on them.
The rumours came after Reuters reported that Barclays had ended its partnership with Coinbase, quoting sources familiar with the matter. Neither Barclays or Coinbase had opted to comment on the story.
Jason Scales, managing director of Hubb, a blockchain incubator at the Isle of Man, told FinTech Global that banks are facing a lot of pressure from “crypto companies, and in particular exchanges, with clients looking to have banking relationships and using the ‘you already bank Coinbase’ stick to beat them with.”
He continued, “This has only been possible because of ringfencing and the separation of the retail and commercial banking arms of these major banks. But in recent times – with the looming financial uncertainties globally – these commercial banking arms have also begun to tighten their risk profiles. From a trust point of view, reputable exchanges want tier one banking relationships.”
Scales added that “this is opening up a substantial opportunity for challenger banks”.
Kevin Murcko, CEO of CoinMetro, the crypto exchange, said, “Banks do not like risk. Companies need to be stringent on their onboarding, listing, KYT and KYC policies and should be aware, internally, of the risks associated with going outside the boundaries of those set frameworks.”
Even though Santander has denied severing ties with Coinbase, Murcko encouraged crypto exchanges to follow in the footsteps of financial intermediaries like brokers or exchanges and “always have multiple banking relationships as banks can [sever] ties with a client, no matter the size.” He continued, “If banks don’t, they risk becoming subject to an inquiry from the regulator based on the actions of their client or the client’s clients.”
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