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Bitcoin speculators in the UK are facing high fees for transferring their digital crypto gains into fiat currency, because digital currency exchanges are struggling to build relationships with UK based banks, the FT revealed over the weekend.
UK banks are apparently “taking a lot more time to get comfortable” when it comes to dealing with bitcoin, or cryptocurrency exchanges, than their European and US counterparts, according to Obi Nwosu, chief executive of Coinfloor, the cryptocurrency exchange.
Nwosu blames the lack of smaller, independent banks, in the UK; on the continent, these types of agile enterprises have proved to be more amenable to doing business with bitcoin exchanges.
UK based banks, including Natwest, and HSBC, allegedly, are highly suspicious of digital currency transactions due to the fact that they are anonymous. The fact that the source of the payments are not known triggers anti-money laundering and fraud alerts, leading banks to call customers requesting explanations as to where the money has originated from.
Another crypto trader quoted in the article revealed that they had been forced to “send £10 to a Lithuanian company in order to set up a relationship I was using. When I tried doing it from my Natwest current account they advised me not to.”
Many crypto speculators have turned to peer-to-peer exchanges in order to “cash out”, which involves handing over sums to a trusted, rated broker on platforms such as Skype, or bittylicious, who make a profit on the buy sell spread – but even the brokers can struggle to get past the bank’s stringent regulations, leading to delays in the transfer of money.
On other sites, money can be transferred to amateur brokers who subsequently redirect funds back to the original owner’s bank account, earning trust ratings in the process, but this can be a high risk operation, and it is hard to gain a reputation as brokers prefer not to deal with newcomers.
A major problem related to delays in withdrawing money from crypto exchanges, which allow customers to buy and sell the likes of bitcoin, Ethereum, and other “alt” coins, such as Litecoin, or Dash, is the current volatility of digital currencies.
The prices of digital currencies can famously fluctuate rapidly in either direction, which makes the risk of delay in buying or selling crypto a considerable one for speculators. The FT also cites the experience of one trader who said that “in the past I’ve been burnt by the price dropping £2,000 while I was waiting to transfer my money out. You just have to pray that it goes up again.”
The banks, however, when questioned, have pushed back, saying that they would only investigate transactions if they identified patterns that, based on Proceeds of Crime Act (POCA) guidelines, suggested that it was warranted.
When transferring money from exchanges, such as bitcoinwallet, payment transactions are often routed through Europe, meaning that the buyer or seller has to pay a commission, which can be high.
It seems like something of an irony, that, having been introduced to provide a better, and more efficient system of financial exchange, the desire to “cash out” is driving up transaction fees for speculators. Having said that, trading or arbitraging bitcoin and other alt currencies was not necessarily what the system was designed for.