Barclays Cuts Ties with Coinbase: What It Means for Cryptocurrency Banking

The Barclays-Coinbase Split

In a surprising turn of events that sounds like a plot twist in a banking drama, Barclays has pulled the rug from under Coinbase, the popular U.S.-based cryptocurrency exchange. While one might think this decision was made during a particularly intense round of Monopoly, the reality is a bit more complex. Coinbase has since scrambled to find a replacement in ClearBank, but the consequences are more than just a minor inconvenience.

How Banking Relationships Work (or Don’t)

Barclays was instrumental in connecting Coinbase to the U.K. Faster Payments Scheme (FPS), which allowed for instantaneous withdrawals and deposits in British pounds. A dream for any business! However, that dream is currently on hold, as ClearBank won’t be able to offer similar services until at least the end of Q3 2019. So, for now, those quick pound deposits? Forget about it. They’re taking a coffee break for a couple of days instead.

Santander Gets Involved

As if the drama wasn’t enough, rumors surfaced that Spanish bank Santander was blocking U.K. customers from depositing funds into Coinbase. However, a spokesperson from Santander was quick to deny these allegations, stating, “We do not block payments to any legitimate company.” Talk about a banking soap opera!

Regulations and Their Red Tape

The banking sector is rife with regulations, and these could very well explain Barclays’ decision to sever ties with Coinbase. According to Joshua Scigala, CEO of Bitcoin exchange Vaultoro, the existing regulations create a massive moat around traditional banks, making it tough for start-ups to compete. Ironically, it seems that these extensive regulations may end up biting them back, as they become too entrenched to innovate.

The Future of Crypto Banking

To throw more fuel on the fire, Barclays once contemplated ways to bring Bitcoin into the mainstream, but how can you innovate when your actions scream otherwise? Asheesh Vaswani, the U.K. CEO of Barclays, had hinted at discussions about cryptocurrencies, but the actions the bank has taken (or not taken) might suggest otherwise. With numerous fines weighing heavily on traditional banks for anti-money laundering (AML) breaches, the reluctance to associate with the unpredictable world of cryptocurrency could be a sound, albeit cautious, strategy.

Conclusion: What Lies Ahead?

The banking sector is certainly in a state of flux, balancing the demands of quick transactions with the slow-moving machinery of regulations. With challenger banks like ClearBank already making strides, it’s clear the landscape is changing. Will traditional banks adapt or will they continue to lag behind? Only time will tell, but for now, it looks like Coinbase will have to take a more scenic route when processing those GBP transactions.