UK Crypto Banks Put Up Limits In Order to Restrict Retail Investors’ Access to Crypto

Banking institutions across the world have started reviewing the partnerships with crypto firms and have started initiating necessary measures to avoid any regulatory wrath.

On Thursday, March 2, HSBC Holdings along with Nationwide Building Society have toughened limits for retail customers’ access to cryptocurrency assets. These two have become the latest British banks to impose curbs amid a series of scandals strike the cryptocurrency market.

Earlier on Wednesday, the building society informed customers that Nationwide is applying daily limits of £5,000 ($5,965) on the crypto purchases made through debit cards. Similarly, the bank’s credit cards can no longer be used to make crypto purchases. Meanwhile, HSBC has also said that it has banned its customers from making crypto purchases through credit cards since last month.

In an emailed statement to Bloomberg, HSBC wrote: “This is because of the possible risk to customers”. Both these banks pointed out at the warnings issued by UK’s topmost regulator - Financial Conduit Authority (FCA) - which has labelled crypto as a very high-risk assets for several years.

These two asking institutions join other lenders such as Banco Santander SA, Lloyds Banking Group Plc and Natwest Group Plc, who have placed crypto-specific limits on UK customers in recent years. A majority of the other banks have also implemented exchange-specific restrictions with the most popular target being global crypto exchange Binance Holdings.

Regulators worldwide have been up on their toes recently after the high-profile collapse of crypto exchange FTX last year in November 2022. Global bodies such as the International Monetary Fund, Financial Stability Board, and the Financial Action Task Force have been repeatedly warning banks to weigh the risks of their exposure to crypto institutions.

The regulators have warned that banks should, in no case, undertake risks which are beyond their capacity of handling them.

Furthermore, a lot has been going around the recent insolvency fears of crypto-focused bank Silvergate Capital. Earlier this week, the bank delayed filing its annual report with the U.S. SEC citing a crisis of confidence that it is facing following the collapse of crypto exchange FTX.

This has got the worst fears of the regulators alive regarding the overexposure of banks to crypto institutions. If Silvergate Banks fails under any case, it would set up a new precedence why other banks need to be extremely cautious with the crypto approach.