Banks are blocking payments to cryptocurrency trading platforms such as Binance and Kraken to protect customers following a dramatic spike in investment scam losses.
Restrictions have been sparked by an increase in fraudsters posing as investment advisers to trick victims into sending money to crypto e-wallets where the money can disappear without a trace.
Losses to investment scams were up 42% to £135.1m in 2020 and banks say they have seen a high level of crypto scams in recent months, particularly through social media sites.
In June, the Financial Conduct Authority (FCA) issued a formal warning about Binance Markets Ltd, banning it from operating in the UK. Taking their lead from the regulator, many UK banks have since announced that they will stop customers from making payments to crypto trading platforms.
How do crypto scams work?
Investment in crypto is always high risk, as the market is largely unregulated which means your money isn’t protected by the Financial Ombudsman Service or Financial Services Compensation Scheme if something goes wrong.
Crypto has also attracted scammers who take out malicious adverts with get-rich-quick claims on search engines and social media, sometimes with bogus celebrity endorsements. These ads direct you to fill in your contact details so that a fraudster can follow up with a telephone call posing as a crypto trader.
In some cases, fraudsters pose as ‘support staff’ and convince victims to download remote access software so that they can control their devices and empty their crypto e-wallets.
- Find out more: how to spot an investment scam
Which banks block crypto payments?
Lloyds Banking Group has had a ban on virtual currency payments (including crypto exchanges such as Binance) on its credit cards since 2018 and it continues to assess other types of payment on a case-by-case basis.
Virgin Money has also blocked all crypto purchases for credit card users since February 2018 and continues to do so.
The Times reported in January 2021 that HSBC won’t process crypto payments. The bank confirmed to Which? that customers can’t buy or sell any crypto directly, saying it’s ‘closely following developments and changing regulation in these markets’.
Starling suspended outbound Faster Payments to certain crypto platforms from 19 May to 22 June 2021 (card payments were never blocked). The ban was lifted on 23 June, although the digital bank says that payments are still subject to scrutiny where necessary.
NatWest Group also made an early move, issuing an urgent warning about crypto scams in May, before restricting transactions from 24 June. It currently caps the daily spending limit to any crypto exchange and blocks all payments to specific firms where it sees significant levels of fraud. Customers can still accept crypto as a form of payment.
Other banks introduced bans following the FCA warning about Binance:
- Barclays blocked both debit and credit card payments to Binance with effect from 5 July. Customers can still withdraw funds from Binance.
- Metro Bank is currently restricting payments to Binance. It told us that it has ‘a limited appetite for these types of transactions’ and has controls in place to manage risks from a fraud and financial crime perspective.
- Santander notified customers that it would stop payments from their accounts to Binance from 8 July, although they can still withdraw cash.
- Tesco Bank told Which? that it has implemented a block on credit card payments to any company involved in crypto purchase or trading activities since 14 July. The block doesn’t affect debit card payments or bank transfers.
- TSB has said that it will actively block crypto purchases where it sees evidence of fraud on those platforms, but didn’t confirm if this affects both card payments and bank transfers.
Will other banks follow suit?
We asked other current account providers if they plan to block crypto purchases:
Monzo didn’t respond to our request for information (although Monzo users did report blocks on crypto purchases back in April 2021).
Nationwide has no ban in place, but said that its systems are designed to pick up any transactions felt to be suspicious or unusual for members, including payments to trading platforms such as crypto exchanges.
The Co-operative Bank doesn’t have a crypto block in place, though it said it takes ‘a risk based approach when reviewing transactions, irrespective of the type of payment and where it’s being paid to’ and where payments are viewed as high risk, it will communicate with customers to get further information before the payment is processed.
- Find out more: cryptocurrencies explained
This article was updated on 21/07/2021 to reflect the Co-operative Bank’s position.