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The UK financial regulator, the Financial Conduct Authority (FCA) has accused financial institutions of withholding financial services from distributed ledger technology (DLT) start-ups on a wholesale basis. The assessments have been published in a report examining the outcome of the nationâs âregulatory sandboxâ one year after its launch.
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The FCA Has Accused UK Banks Of âDenying Certain Customers Bank Accounts on a Wholesale Basisâ
In a report discussing the achievements and lessons learned one year after the FCAâs establishment of a regulatory sandbox, the financial conduct authority has accused financial institutions of intentionally denying banking services to companies operating in the blockchain industry.
The FCA states that it has âwitnessed the denial of banking services first-hand across a number of firms in the first two cohorts of the sandbox. Difficulties have been particularly pronounced for firms wishing to leverage [blockchain technology to] become payment institutions, or become electronic money institutions.â
The FCA states that it is âconcerned by what appear to be blanket refusals for certain kinds of applicant firms,â adding that there are âapparent inconsistencies within individual banks regarding how they apply their assessment criteria in approving access to banking services.â The FCA states that the decision by the banking sector to deny services to DLT companies is motivated by âstrategic business decisionsâ, among a range of factors.
The FCA Has Emphasized the Negative Effects That an Inability to Access Banking Services Will Have Upon the Nascent DLT Industry
The FCA states that it is âconcerned that denying certain customers bank accounts on a wholesale basis causes significant barriers to entry and could lead to poor competition in certain markets.â The report states that the current banking practices âpose [risks] to innovation and competition.â
The FCA state that âif certain firms cannot secure bank accounts it is possible that they will be unable to meet our conditions for authorization and would therefore be unable to enter the market, even to test in the sandbox.â The report asserts that âsome firms have been unable to conduct their tests as initially plannedâ as a consequence of being sidelined from accessing financial services.
Money Laundering Risks and Blockchain Technology
The FCA asserts that financial institutions repeatedly cited perceived money laundering risks associated with blockchain technology as the basis for refusing to provide services to DLT companies.
The FCA has rejected this argument, stating that it is âclear that effective money laundering risk management need not result in wholesale de-riskingâ. The report adds that the FCA âwork[s] to ensure that the UK financial system is a hostile environment for money launderers.â
Are you surprised by the FCAâs assessments regarding a refusal to provide financial services to distributed ledger technology start-ups? Share your thoughts in the comments section below!
Images courtesy of Shutterstock, fca.org.uk
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The post FCA Accuses Banks of Anti-Competitive Practices Towards DLT Start-Ups appeared first on Bitcoin News.
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