Banks refusing to accept profits from crypto trading without proof of tax being paid

The national firm has said the UK financial sector continues a cautious approach to cryptocurrencies and warned some of its clients have recently found that banks have started to insist on proof that tax has been paid before accepting large deposits made from cryptocurrency trading.

This is in contrast to other types of deposits in which banks do not require proof that tax has been made.

Clive Gawthorpe, partner in UHY Manchester office said it is highly unusual for banks to demand proof that tax has been paid before accepting a deposit.

“To introduce this requirement specifically for cryptocurrencies shows how cautious UK banks are about cryptos,” he said.

“Some UK banks have decided that the high risk of reputational damage posed by cryptocurrencies is simply not worth it and are limiting their exposure.”

Recently, cryptocurrencies have attracted negative publicity for their associations with money laundering.

Banks have suggested that dealing with cryptocurrencies therefore increases the administrative burden on the banks to ensure transactions are legitimate.

Some UK banks have decided to reduce their potential legal and reputational exposure by undertaking much more rigorous due diligence checks on any transactions related to cryptocurrency. 

HSBC said it would restrict the processing of transfers from digital wallets to HSBC. Other banks have said they will restrict the usage of credit cards to buy and sell cryptocurrency.