A UK based start-up is seeking to be deemed as the first cryptocurrency payment bank of the country. The London based firm, DAG Global, established in 2018, said that it might reapply for the license of banking in the upcoming month with an intention to offer bank accounts to crypto businesses starting 2021.
Companies handling cryptocurrencies like Bitcoin and the ones that offer services for them have been long embroiled in struggles to keep up the relationship with traditional financial institutions like banks due to their alleged links with money laundering as well as some other kinds of illegal activities related to money. This undertaking is also hailed to be a test of regulators’ comfort with digital assets while they struggle with the concerns of financial crime.
Sean Kiernan, that chief executive officer, said that “It’s a lack of understanding and reputation risk that has kept others away — we think it can be a cleaner sector [than mainstream finance].”
He insisted that since the bank applied initially last May, it underwent a number of rounds of “constructive dialogue” with the regulators of UK, the Prudential Regulation Authority and Financial Conduct Authority. “Thus far, the regulators have not raised any red flags,” he said.
Even businesses like Coinbase that is touted to be among the largest exchanges of cryptocurrencies is supported by renowned investors like Andreessen Horowitz but has toiled hard to consolidate the banking relationships across the UK.
Stephanie Ramezan, chief commercial officer at DAG, said: “We’re being approached on a daily basis by corporates in the space because people are fed up with what they’re faced with to meet basic business banking needs at the moment.”
The efforts of DAG’s to bag a license seems to be taking too long unexpectedly. Earlier, the company was determined to roll out the service in the year 2019, but it isn’t the first bank to have faced delays through the years as an increase in scrutiny has been observed in banks’ business models.
The FCA and PRA said they did not comment on individual companies. Both regulators have previously warned about the risks associated with cryptocurrency businesses, but neither has actively discouraged banks from providing services to them.
The PRA reminded banks in 2018 to keep up the “effective risk strategies” while “act in a prudent manner” when it comes to crypto assets. It also raised concerns regarding the volatility & risks of money laundering and terrorism financing. The FCA takes a keen interest in the supervision of anti-money as well as the risk of financing counter-terrorism in businesses of crypto assets. It has also stressed the urgency of staunch measures to prevent criminality related to cryptocurrencies.
However, its guidance says that “there should be relatively few cases where it is necessary to decline business relationships solely because of anti-money laundering requirements.”