Cryptocurrency traders have found themselves stonewalled in recent weeks after a host of banks began blocking payments to platforms such as Binance and Kraken.
In June, the Financial Conduct Authority (FCA) banned popular trading platform Binance from operating in Britain, prompting a number of financial institutions to prohibit customers from making payments.
A sharp increase in crypto investment scams has also been cited as a key reason for the crackdown, with high street banks issuing a warning to consumers.
According to consumer rights group Which?, one of the most common scams being reported involves fraudsters posing as investment ‘advisers’ to dupe victims into transferring money to crypto wallets.
Thereafter, the money disappears, and victims are unable to track down those responsible.
Crypto trading is traditionally high risk with regard to return on investment. This week, the price of Bitcoin has fluctuated significantly, for example.
With the landscape largely unregulated, this also poses additional risks to investors, who aren’t afforded protections by the Financial Ombudsman Service.
As a result, many scam victims are left out of pocket with next to no chance of receiving compensation.
In June, the FCA issued a consumer warning over the risk of crypto investments, noting that consumers should “be wary of adverts online” which promise high returns.
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“Most firms advertising and selling investments in cryptoassets are not authorised by the FCA,” the regulator said.
“This means that if you invest in certain cryptoassets you will not have access to the Financial Ombudsman Service or the Financial Services Compensation Scheme if things go wrong.”
According to Which?, crypto investment scams increased by 42% last year, with consumers losing more than £135 million. In recent months, banks have also reported a spike in the volume of scams.
Which banks have blocked payments?
Some of the UK’s most popular high street banks have blocked payments to crypto trading platforms amid regulatory crackdowns, with research from Which? highlighting policies earlier this week.
Barclays is among the most prominent banks to block payments to Binance. The high street lender blocked debit and credit card payments to the trading platform on 5th July.
Around the same time, Santander also informed customers that payments to Binance would be prohibited. Customers at both banks can still withdraw funds, however.
On 24th June, NatWest Group, which includes Royal Bank of Scotland, began restricting payments in the wake of the FCA announcement. Daily spending limits are applied for all crypto exchanges.
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Tesco Bank told Which? it introduced a block on credit card payments to “any company involved in crypto purchase or trading activities” on 14th July.
The block doesn’t affect debit card payments or bank transfers.
“TSB has said that it will actively block crypto purchases where it sees evidence of fraud on those platforms, but didn’t confirm if this affects both card payments and bank transfers,” according to Which?
Some of high street banks have maintained long-term bans on payments to crypto trading platforms.
Lloyds Banking Group introduced its ban on credit cards in 2018 while Virgin Money implemented its own credit card block in February that year.