British Bank Bans Transactions to Crypto Exchanges Amidst FTX Collapse

Starling Bank, a British digital bank, has recently banned customers from receiving or sending money to centralized cryptocurrency exchanges. The bank did this due to the collapse of FTX and the perceived risk that cryptocurrency exchanges pose to customers. 

Starling Bank is not a particularly large bank, but this decision does offer some insight into some of the ways that centralized finance can attack cryptocurrency. This article will go into further detail about what it means when a bank disallows customers from interacting with a centralized crypto exchange. 

Why Has Starling Bank Has Banned Transactions to Crypto Exchanges?

Starling Bank issued a statement in which they stated that due to rising scams in cryptocurrency they have banned customers from sending or receiving money to exchanges. This is presumably in response to the collapse of FTX, which has resulted in customers of the exchange losing billions of dollars. 

The Implications of Banks Banning Crypto Transactions

First of all, Starling Bank is not a large bank. But this still is cause for concern because they are not the only bank that has banned transactions to crypto exchanges. Nationwide Building Society has banned cardholders from using their cards on Binance. 

Nationwide Building Society is a large bank and financial institution – it’s the sixth largest in the UK. 

Anyway, it’s concerning when banks do this because the majority of cryptocurrency is purchased on centralized exchanges. In fact, many cryptocurrency investors have no idea how to store their cryptocurrency in their own wallet. 

That right there is concerning because it will be much more difficult to bring newcomers into cryptocurrency when they do not have a convenient way to purchase cryptocurrency. The alternatives include purchasing it at a Bitcoin ATM (expensive), purchasing it in-person from someone (potentially dangerous), or buying it online peer-to-peer (risky). 

There’s no convenient way to purchase cryptocurrency other than using a centralized exchange, which is likely why they have become so popular. 

This is simply a way for banks to attack cryptocurrency. It also might have to do with the very weak economy in the United Kingdom. Banks probably do not want money leaving the accounts unless necessary. And they especially do not want it going to cryptocurrency where it will presumably not enter back into the fiat system. 

Can Bitcoin Overcome Banks Banning Exchanges?

The endgame of banks banning exchanges is that all banks ban all transactions to and from cryptocurrency exchanges. This sounds ridiculous, but the banks have the ability to do this. As we have seen, banks in the United Kingdom have already started doing this. Banks in China do it as well. 

To answer the question, yes, Bitcoin can overcome banks banning exchanges. Bitcoin is already at the point where it’s used so much that it’s difficult to simply make it disappear. If the banks would have banned transfers when Kraken launched in 2011, then this would be a different story. Bitcoin likely would have taken a lot longer to become mainstream without the help of centralized exchanges like Kraken in the early days. 

This really is not something to worry about. Bitcoin and cryptocurrency in general are so innovative that someone will come up with a workaround solution. The most likely scenario is that peer to peer transactions will become the norm for trading cryptocurrency. Services will also likely launch that make it possible to send crypto to an exchange without the use of a bank account. 

Has This Impacted The Price of Bitcoin?

So many different things impact the price of Bitcoin that it’s difficult to say whether or not this announcement had any impact. However, if it did have any impact, then it appears negligible. The price of Bitcoin is hovering around $16.5k USD, more information on WCS.

This is not super surprising. It would take a major country’s banking system banning transfers to crypto exchanges to see any impact on the price. One small bank in the United Kingdom doing it does not scare anyone, but it does indicate to us that banks can and will implement policies like this in order to attack cryptocurrency. 

Final Thoughts

That mostly covers it for everything you need to know about Starling Bank banning transactions to crypto exchanges. It’s not something you need to worry about at the moment, but it could spread to other banks in the future.