The UK banks Nationwide Building Society and HSBC Holdings Plc have recently implemented strict restrictions on their retail customer’s access to crypto assets. This follows numerous industry controversies and cautionary regulatory statements, required to prevent any potential malpractice.
Banks Taking Action
Nationwide announced to its customers on Wednesday that it is applying a daily limit of £5,000 ($5,965) for debit-card purchases of crypto assets, and that their credit cards can no longer be used for buying crypto. Last month, HSBC stated that it had also prohibited its customers from making crypto purchases with credit cards.
The Reason for this Move
Both banks referred to the Financial Conduct Authority’s (FCA) warnings, which have been in place for several years, labeling cryptocurrency as a high-risk investment. UK banking giants such as Banco Santander SA and Natwest Group Plc have already implemented various limitations regarding the transactions of crypto assets. Additionally, many sizable banking institutions have also implemented several exchange-specific regulations.
One of the most renowned global crypto platforms, Binance Holdings Ltd, has been affected the most by these current limitations. The November collapse of the crypto exchange FTX has raised further concern about the potential risks associated with investing in cryptocurrency. Professionals are warning investors to be aware of the dangers and to proceed with caution. Global institutions such as the Financial Stability Board, the International Monetary Fund, and the Financial Action Task Force have continuously reminded banks to be mindful of the risks accompanying digital currencies in the traditional financial system.
Silvergate Capital Corp, a US bank with strong links to the cryptocurrency sector, has recently come under increased scrutiny. On Thursday, its shares dropped to an all-time low as it assesses its ability to remain operational. The Federal Reserve and other regulators have warned financial institutions to be aware of the potential liquidity risks posed by investments from crypto-related businesses.