Barclays strikes banking deal with Coinbase

The deal will simplify the process of deposits and withdrawals for Coinbase’s UK customers, who have previously had their transactions processed through an Estonian bank.

The partnership comes as regulators circle the hundreds of cryptocurrency exchanges springing up to cater to demand for digital asset markets, many of which are unregulated. Barclays declined to comment.

The US Securities and Exchange Commission is increasingly warning that many digital tokens traded on exchanges act like securities, which would place those exchanges under its mandate.

Earlier this month, Japan temporarily suspended two cryptocurrency exchanges, and Mark Carney, governor of the Bank of England, said trading on cryptocurrency exchanges should be regulated in a similar way to securities trading. Bitcoin’s existential crisis Play video Many banks have shunned relationships with start-ups that handle cryptocurrencies such as bitcoin, concerned by their perceived links to crimes from money laundering to terrorism financing.

Instead, most European exchanges bank with lesser-known private lenders in countries more welcoming of cryptocurrency fintech, such as Gibraltar and Poland. Coinbase said the company already had an existing relationship with an Estonian bank but wanted to work with a UK bank to give British users “a more familiar experience”.

Founded in 2011, Coinbase attracted a barrage of complaints from customers during last year’s cryptocurrency trading frenzy, over service outages and slow fund withdrawals. It has also launched an internal investigation into insider trading by employees, and is facing a potential class action lawsuit.

The company had spoken to many banks before striking an agreement with Barclays, Coinbase said. Many larger exchanges are pushing to legitimise a sector where traders have been vulnerable to extreme price volatility and hacking.

In a move that critics say hampers innovation, most banks have been reluctant to open accounts for cryptocurrency-linked companies over fears that the anonymity afforded to digital currencies could expose them to breaches of anti-money laundering regulations. HSBC, for example, has a complete ban on doing business with the money services sector.

However, Barclays has been working with Goldman Sachs-backed Circle which uses the blockchain technology that underpins bitcoin to provide peer-to-peer payment services.

Coinbase said it had also gained an emoney licence from the Financial Conduct Authority, the UK markets regulator, and will be allowed to passport its services into Europe.