It was announced that Barclays Bank in the U.K. cut off cryptocurrency exchange Coinbase as a customer. This means Coinbase’s core banking relationship was severed. This is not surprising on a number of levels.
Cryptocurrency and blockchain will upend banking forever, so why would a bank do anything but freeze out blockchain companies?
This aside, corporates hate risk and everyone gets the risk of the unknown–that blockchain and crypto present.
In addition know your customer (KYC)/anti money laundering (AML), financial system protections against money laundering and other criminal activity has never been more stringent. This clampdown on money and its flow is mainly responsible for the collapse in velocity of money, a potential hugely damaging development to the global economy, but as often happens, the response to constrain a tiny minority of bad actors ends up punishing the rest, more than the malfeasance that the regulators are trying to address. The ease of use, speed and novelty of crypto makes banks nervous and having been fined billions for actively facilitating money laundering, they don’t want to be seen to be opening more potential channels for it.
It is, sadly, mainly myth. The World Bank reports that only a couple percent of the criminal money in the banking system is spotted, so it seems that all the AML/KYC checks are for naught. Meanwhile money flows are choked.
The banks have no reason in general to change the picture, as for many, survival as enterprises is enough. You can see their fragility right now as the stock market corrects and the banks slump in the vanguard of big market cap losses as investors sense banks can’t take much of a recession without big consequences.
Meanwhile banks turn away blockchain banking.
Yet nothing is going to put the crypto genie back in the bottle. The systemic strangulation of the velocity of money is one of the reasons crypto has got a hold. Crypto is simply better currency for international transfers. It’s faster, it never gets lost, it’s cheaper, irreversible and it works 24/7. Why “real” money is so bad at these functions is simply a reflection of the comfy inertia of the current system
Blockchain will upend banks and guess what, banks will just morph. Crypto and blockchain will not destroy the banking industry, in the same way paper money didn’t. Banks don’t want to morph, of course, but the banks that take the lead will annihilate the banks that are late to the party. That is as predictable as you can get.
This is also as true for countries as it is for companies.
If a country doesn’t get busy when a new technology breaks it gets left behind eating the dust of the countries that do. Europe and the U.K. and the internet? No Google, no Amazon, no Apple, no Netflix….. and not much tax to show from the presence of their outposts in their techno-colonies.
This is a crucial issue for the U.K. If the U.K.’s Brexit happens it will be cut adrift on a cold sea of independence with the U.K. simply without the scale to go toe to toe with the other big players of the world economy. The only way to go it alone is to embrace a higher level of risk and shoot for higher rewards. Technology is the only gambit and in history it has paid off for Britain. At the beginnings of the Industrial Revolution, the U.K. had six million citizens and France 30 million. 250 years later the populations are broadly the same. England was the Silicon Valley of its day and its technological prowess upended the European balance of power.
So it is eye opening that while the U.K. seems to be heading for a hard Brexit, it’s trying to kill the biggest technological revolution since the internet in its cradle because that is exactly the wrong stance for a Brexit Britain.
Small countries like Malta, Estonia and Montenegro understand what it is like to be a small country and they are doing all they can to be bases for the future high value-added activities typified by blockchain. Great Britain, only 1% of the world population, will soon have to learn it might be “Great” but it is small too. If a meaningful Brexit happens and it looks like it will even as the “resistance-at-all-costs” mounts, then the choice is clear. Go all out for high tech or resign the country to becoming an overpopulated backwater.
It will be the U.K.’s institutions that will either actively or passively decide.
In 2018, Chambers won Journalist of the Year in the Business Market Commentary category in the State Street U.K. Institutional Press Awards.
Barclays Cuts Off Coinbase As U.K. Prepares To Cut Off Europe – Forbes