Barclays and Coinbase Cut Ties, What This Means for Crypto in the UK
Note: I am not a financial advisor. This is not to be considered financial advice.
On August 13, it was reported that Barclays will no longer offer support for deposits on Coinbase. This will bring short-term changes for UK-based crypto enthusiasts. However, the long-term impact should be minimal. Here are the details of this story.
Coinbase UK Drops Stops Support for ZEC
Prior to Barclays’ decision to end support for Coinbase, customers of Coinbase received emails that the platform would no longer support ZCash (ZEC) wallets or transactions. starting on August 26. On that day, any remaining ZEC balances left in Coinbase exchange wallets of Coinbase UK users will automatically be converted to British Pounds (GBP). Electric Coin Company, the creators and stewards of Zcash, tweeted that no other exchanges operating in the UK were affected by this announcement. The tweet (shown below) also makes it clear that “Zcash is 100 percent compatible with UK regulations & KYC/AML requirements”. This prompted people to ask, why did Coinbase UK stop supporting ZEC transactions?
Impact of Barclays and Coinbase Breakup
On August 13, several news sources reported that Barclays would be ending support for Coinbase UK. Some articles like this one have stated that sources say Barclays was basically running a pilot program for Coinbase and that it was never expected to be a long-term partner. Regardless, this breakup means that Barclays no longer enables Coinbase UK customers the ability to use Faster Payments Scheme (FPS) for instant (60 seconds or less) withdrawals and deposits of GBP.
As a result, this has slowed down the time it takes for customers to transfer funds from bank accounts to Coinbase and vice versa. While this is frustrating for those in the UK that are accustomed to having FPS, it’s important to mention that this service (or anything similar) isn’t even an option for Coinbase users located in other regions of the world. As a comparison, US-based customers typically wait for 3–5 business days (as many as 7–10 calendar days) before USD deposits using ACH are available on Coinbase. Europe-based customers typically wait up to 2–3 business days for EUR deposits using SEPA transfers.
There’s Already A Replacement Bank
For UK customers, the good news is Coinbase has already chosen a replacement for Barclays. ClearBank, a so-called ‘challenger bank’, will become the new provider of the Faster Payments Scheme (FPS) for Coinbase by the end of September 2019. For the interim, this means longer wait times for Coinbase UK customers depositing and withdrawing GBP. The bad news is that this switch in providers is the direct cause for Coinbase UK’s decision to stop supporting ZEC wallets and transactions. In the long-term, this could also impact Coinbase UK’s decision to expand its list of supported cryptocurrencies.
On August 5, Coinbase published a blog post stating that it was exploring the addition of eight cryptocurrencies. It will be interesting to note if Coinbase UK differences from other Coinbase regions when it comes to future coin listings. There’s also the possibility, although not likely, that other coins currently listed could be impacted by the change in banking provider.
Multiple Bank Relationships Are Necessary For Fiat-Crypto Exchanges
The biggest takeaway from this story is that exchanges providing fiat-crypto on-ramps and off-ramps should seek partnerships with multiple banks. As this example shows, being reliant upon one bank can be risky if that relationship suddenly ends. By having a number of choices on the table, exchanges like Coinbase can have more control in decision-making about what coins are listed. Moreover, this could enable bank providers to ensure that innovative services like FPS aren’t interrupted if one bank decides to stop cooperation.