How banks are 'stifling UK Bitcoin innovation'

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by Joe Curtis| 28 August 2014

Here's what Bitcoin firms must do to get business accounts from banks.

Banks are suffocating Bitcoin innovation in Britain, according to the CTO of a cryptocurrency startup denied a business account by a major bank.

The CTO of digital currency exchange MetaLair was then forced to take its website down for two months in an attempt to hide the nature of the business as he applied for the account elsewhere.

Johnathan Turrall took the extreme measure after one major bank rejected his application because it discovered MetaLair's business premise was to create a de-centralised exchange for cryptocurrency users to swap between currencies.

Following two months of paperwork, the bank contacted Turrall after discovering the company's website mentioned Bitcoin. He confirmed Bitcoin was key to the company's premise.

After weeks of waiting to hear from the bank's anti-money laundering team, the application was subsequently turned down.

Turrall then shut down MetaLair's website in order to obtain a business account from another bank.

He has now published an open letter deriding banks' attitudes to Bitcoin, arguing they may damage the UK's plans to become a centre of financial innovation.

He wrote: "By refusing to work alongside Bitcoin and other cryptocurrencies, UK banks are stifling innovation in the UK, leaving the market open for other global organisations to move in and dominate the UK.

"The banks are doing themselves a disservice in the long run too; by refusing to work alongside cryptocurrencies they are removing any opportunities they may have to create new services and revenue streams for themselves once cryptocurrency reaches mass adoption."

He claimed the "very vast majority" of Bitcoin firms have also been refused bank accounts.

Marc Warne, founder of Bitcoin-buying service Bittylicious, recently said as much on Radio 4 show The Bottom Line.

He said: "I can't get a bank account in the UK. Not a single bank, even tiny banks here, even ones from Europe will consider giving me a bank account... The UK's kind of being left behind."

In CBR's own survey of the UK's high street banks, none openly stated that they would deny business accounts to firms in which Bitcoin was central to their business premise.

An HSBC spokesman said: "We are watching the development of virtual currencies and their implications closely. We are applying the highest standards and controls in relation to Bitcoin, as we do with the more common forms of financial transaction."

A spokeswoman for The Co-operative Bank said: "Whilst we always assess account applications against our risk appetite, the fact that a business accepts bitcoins as a means of payment for goods and services is not likely to have an impact on whether we open an account for a prospective customer."

Barclays and Lloyds TSB declined to comment, while Santander failed to respond.

The news comes weeks after Chancellor George Osborne announced a Treasury review into the pros and cons of Bitcoin, exploring its potential to turn Britain into a hub of new financial technologies.

Bitcoin is not governed by any central bank, and there are concerns over its security after hundreds of thousands of bitcoins were also lost in February by the then-world's largest cryptocurrency exchange, Mt. Gox, which blamed hackers.

However, its cheap and fast payments transfers have seen the financial sector scrambling to keep up.

One challenge banks face is the fact that the UK has not outlined any regulation measures for the currency.

HMRC scrapped VAT on the currency earlier this year, but the UK's Financial Conduct Authority (FCA) has been reluctant to issue any guidance on how cryptocurrencies might be regulated.

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