By Emily Nicolle on Wednesday 14 March 2018
One of the top 10 cryptocurrency exchanges now has a UK license and a British bank account, showing major industry strides.
San Francisco start-up Coinbase, a platform which allows users to buy, sell, exchange and hold cryptocurrencies like Bitcoin and Ethereum, has been granted an e-money license by the Financial Conduct Authority. It has also become the first crypto-exchange to join the UK Faster Payments scheme, and its UK subsidiary now owns a bank account with Barclays Plc.
This means that UK Coinbase users will now be able to deposit and withdraw GBP using the domestic SWIFT system, instead of having to use EUR and the European SEPA system going via Coinbase’s bank account in Estonia. More importantly, the first of its kind deal signifies a new level of cryptocurrency acceptance from UK major lenders opening up, as it looks increasingly likely that the alt-coin industry is headed for regulation.
Confirming the news in a company blog post, Coinbase UK CEO Zeeshan Feroz said: “The license requires Coinbase’s e-money operations to meet the strict rules enforced by the FCA and the Payment Services Directive. For our customers, this will ultimately help us deliver a better experience through new partnerships and an easier to use product.
“We are committed to making sure customer funds are always secure and this update means that our e-money operations have safeguards and operational standards at par with other regulated financial institutions.”
As a result of the new license, client funds will now be separated from Coinbase and held in separate bank accounts (presumably courtesy of Barclays). The Faster Payments integration will smooth out the transfer experience for users, making payments to and from the platform now supported by all UK major banks.
Feroz also mentioned that the e-money license will extend beyond the UK to 23 countries within the European Union, likely to be as a result of EU passporting laws for financial services which will terminate once the UK leaves the EU in 2019.
Research published elsewhere this week showed that UK investor confidence in the cryptocurrency sector remains strong, with most believing valuations will rise over the next 12 months.
Bradley Rice, a senior regulation lawyer at law firm Ashurst, commented on the news: "This is another huge step for the democratisation of cryptocurrencies. It will make it easier for Coinbase's customers in Europe to move money on and off the exchange, with the comfort of knowing that such transactions are subject to more stringent legal requirements around financial crime and the segregation of customer's money, which can only be good news.
"But this is bigger than cryptocurrencies. An e-money and payment services licence will help to make transacting in virtual currencies more straightforward for Coinbase's customers. As more exchanges become licensed for these purposes, the need for a mainstream stablecoin becomes more evident. Central Banks will no doubt face increased pressure to give real consideration to enabling the integration of virtual currencies into their monetary policies."
21 March 2023
Daniel Lanyon