Less than a week since it started licensing blockchain businesses, Gibraltar has received bad news from the United Kingdom. A leading British bank has refused to process orders from crypto firms based in the overseas territory. Gibraltan banks are now on the lookout for another UK banking partner.
The negative reaction to Gibraltar’s decision to seduce the crypto sector came from the Royal Bank of Scotland. Its partner, the Gibraltar International Bank, has received notification that RBS will no longer process transactions connected to firms dealing with cryptocurrencies. The Scottish bank has effectively closed the clearing system for companies licensed under the new Digital Ledger Technology Regulatory Framework implemented by Gibraltar.
The new DTL legislation went into effect on January 1, after Gibraltar Parliament approved a bill last month designed to update its financial regulations. Along with online betting and gaming, financial services provide a great deal of Gibraltar’s domestic product and income. Local authorities have decided to tap into the profits of the new cryptocurrency segment, rather than ban or ignore it. The territory has also become the first in European jurisdiction to regulate ICOs through its Financial Services Commission (GFSC).
Following RBS’s warning, the Chief Operating Officer of GIB Derek Sene announced that his bank would look for another UK correspondent to establish a mechanism for processing crypto related transfers. He said that making strategic decisions such as this was standard practice. The Gibraltar International Bank is not dealing with cryptocurrencies but has started opening accounts for companies using blockchain technology in October last year. Quoted by local media, Sene stated that GIB would continue operating within the DLT industry.
RBS is yet to comment officially on its decision to reject crypto related transactions from Gibraltar but its management’s attitude towards digital currencies is well known. “Put up the sign from Dante’s Inferno – ‘Abandon hope all ye who enter here” – that’s the only thing authorities could do about cryptocurrencies, according to the bank’s chairman Sir Howard Davies. That’s what needs to be done by the Fed, the ECB and the Bank of England, he told Bloomberg TV in December when Bitcoin touched $15,000.
Davies also said that Bitcoin seemed to him to be a “frothy investment bubble” but admitted he didn’t see how it could be outlawed. He noted the difficulties in defining “alternative payment systems” but also pointed out that “the market is telling us something” about the demand for new, faster payments. That demand is driving customers and companies towards cryptocurrency financial services. It seems Gibraltar authorities have sensed the trend better than those in Britain.
While the Bank of England is “pretty actively” studying Bitcoin and British spies are closely monitoring, UK banks are left to decide what to do with crypto businesses and are mostly turning their backs on them. At the same time British companies have started looking for more hospitable climates on the Continent, as the FT reported a couple of months ago. Poland and Bulgaria have been mentioned but Gibraltar is now taking the lead in Europe. Its authorities have been busy adopting regulations with incentives for companies providing crypto-financial services. And, of course, the climate there is much more clement.
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