HSBC has been accused of shooting itself in the foot after dramatically cutting back its limits on how much money customers can invest on cryptocurrency exchanges.
The bank informed its customers in a memo this week, opening with ‘Cryptocurrency fraud is on the increase’ and going on to say there had been a large rise in crypto scams.
“The Financial Conduct Authority (FCA) has warned that investing in cryptocurrency assets generally involves taking very high risks. The value of cryptocurrencies can change very quickly, with all funds invested at risk, so you could lose everything,” the memo added.
“Crypto assets are unregulated so if something goes wrong, money held in crypto wallets is not protected by the Financial Ombudsman Service and Financial Services Compensation Scheme.”
From August 29, HSBC customers will have limits imposed on debit cards, digital banking services (online and mobile banking), branches and contact centres.
It means that, over a 30-day rolling period, payments to cryptocurrency exchanges will be restricted to £2,500 for a single transaction and a total of £10,000 within that period.
Although the figure remains high compared to many high street banks – several of which do not permit any direct payment to crypto exchanges at all – the move is being viewed as particularly galling to investors who had championed HSBC’s seemingly crypto-friendly approach.
One critic – fintech expert Stefania Barbaglio, founder of Cassiopeia Services, said she believes the tactic of suppressing crypto and alienating customers seems like a familiar story of history repeating itself.
“Banks don’t like crypto, they see it as scam – all about criminals using cryptocurrency as an opportunity to steal money from customers,” she told Crypto AM.
“This narrative falls short of acknowledging the revolutionary potential of cryptocurrency. Crypto has empowered many people to monetise their assets; it has opened greater opportunities for entrepreneurs, businesses to get funding and transact in a faster and easier way.”
She added that the advancement of digital assets were a paradigm shift that traditional banks were struggling to embrace.
“The crux of the matter is clear: If banks fail to pivot, innovate, and adapt to cater to this emerging generation of forward-thinking entrepreneurs, they are going to perish,” she said.
“Money isn’t just a commodity; it’s a fundamental right. The same principle applies to banking. Every individual should have access to their financial resources and the ability to transact freely.
“What is going to be the future of banking? We are still figuring it. Are we going to be able to bank ourselves without traditional banks one day? Probably. One thing is certain: the way we engage with banks tomorrow will bear little resemblance to today. The prospect of evolving into comprehensive hubs for financial prosperity is intriguing. This demands innovation – the key to becoming the ultimate destination for financial growth. “
Sean Kiernan, CEO of digital merchant bank Greengage, explained that high street and challenger banks see risks in acting as fiat currency on and off ramps for clients engaging with crypto trading.
“These risks are perceived as either AML or facilitating potential fraud – even where the bank might be held liable for client losses,” he said.
“Greengage and others see an opportunity in this market. We’ve developed bespoke solutions using advanced technology to deliver such fiat payments as a core of our business.
“Greengage engages in enhanced due diligence on our institutional and sophisticated individual clients. We work with them to mitigate these risks and open up a world of Web3 opportunity of real open finance, sourcing both traditional and digital solutions across the market.”