JPMorgan Chase UK shouldn’t ‘deplatform’ crypto industry

Brian Armstrong, chief executive officer of Coinbase Global Inc., speaks during the Messari Mainnet summit in New York, on Thursday, Sept. 21, 2023.

Michael Nagle | Bloomberg | Getty Images

Coinbase CEO Brian Armstrong is unhappy with JPMorgan Chase’s decision to block crypto-related transactions at its U.K. digital banking subsidiary, Chase UK.

Chase UK earlier this week put out a notice to customers saying it will no longer allow its customers to purchase cryptocurrencies using its debit cards or through bank transfers, citing concerns over the risk of fraud to users from digital tokens.

The bank, which has operated as a standalone entity in the U.K. since 2021, said it was taking the step because “fraudsters are increasingly using crypto assets to steal large sums of money from people.”

“Once in a while we see a bank in the world that decides they want to de-platform this whole industry,” Armstrong said in an interview with CNBC’s “Squawk Box” on Thursday.

“I don’t think that’s OK. I don’t think that’s the rule of things in our society. I think the government should decide what is allowed and what’s not.”

The move from Chase UK has not happened in a vacuum. Other British lenders have taken similar steps to bar crypto transactions, citing the risk of fraud.

Examples include NatWest, which placed limits on the amount of cash that can be sent to crypto exchanges, and HSBC, which banned crypto purchases altogether.

Crypto fraud concerns

In its note to customers Tuesday, Chase UK said that it was blocking the use of crypto by its customers due to concerns over a rise in fraud.

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Data from Action Fraud, the U.K. fraud reporting agency, shows that U.K. consumer losses to crypto fraud increased by over 40% in the last year, surpassing £300 million for the first time.

Bitcoin, ether, XRP and other cryptocurrencies are not legal currency.

Originally created as an alternative, online form of money meant to bypass the need for bank accounts and other financial middlemen, they have increasingly been embraced by mainstream financial institutions such as PayPal, Visa, and Mastercard.

But they have long been associated with illicit activities such as money laundering, terrorist financing and illegal gambling, not least due to their pseudonymous nature.

The people transacting in bitcoin and other digital currencies don’t disclose their real identity, making it harder for banks to trace them for suspicious payments versus digital fiat currency transactions.

Legitimizing crypto

Nevertheless, crypto’s proponents say that the industry has matured a great deal in the wake of the collapse of FTX and numerous other scandals. They say it can become part of everyday payments and trading in a way that is legitimate.

For its part, the U.K. has been working to develop legislation that would regulate retail trading in crypto assets.

The Financial Services and Markets Bill is one example of legislation that already includes some provisions on cryptocurrency. That specific law aims to bring crypto assets into the regulatory fold. But it is not a comprehensive law addressing crypto through tailored laws.

In an interview with CNBC’s Arjun Kharpal, Economic Secretary to the Treasury Andrew Griffith said the U.K. could pass a crypto-specific law by April 2024.

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Jurisdictions around the world from Dubai to Singapore have been trying to position themselves as crypto-friendly places to encourage firms to set up shop there.

The U.S., meanwhile, has taken a hard line on cryptocurrency firms with its regulators stepping up enforcement action against companies.

Armstrong suggested that the U.K. government should take heed of Chase UK’s move to ban crypto payments — though he acknowledged the country’s ambition to become a “Web3 and crypto hub.”

“The government in the U.K. through [U.K. PM] Rishi Sunak and Andrew Griffith the city minister in London have it made clear they want to make the U.K. a Web3 and crypto hub,” Armstrong said.

“They are trying to attract businesses there. I was disappointed to see Chase UK’s stance on that. I hope that was a misunderstanding that will be clarified in the coming weeks.”

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