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JPMorgan’s UK Bank Chase Bans Crypto Payments — Anticipating Regulatory Pressure or Scam Concerns?

Published September 27, 2023 8:27 AM
James Morales
Published September 27, 2023 8:27 AM
Key Takeaways
  • JPMorgan’s UK-based digital bank Chase has banned customers from purchasing cryptocurrency.
  • It is the latest bank to impose restrictions on crypto-related transactions over fraud concerns.
  • Recent changes to UK regulation prioritize protecting consumers from fraud.

Some of the UK’s largest banks have imposed restrictions on their customer’s ability to buy cryptocurrency. And the latest instance of the trend might be the strictest example yet.

On Tuesday, September 26, Chase, the UK-based digital bank operated by JPMorgan, announced an outright ban on all payments to crypto exchanges citing concerns over scams. But could regulatory pressure also have informed the decision?

Chase to Ban Crypto Transactions, Blaming a Rise in Fraud

In an email to customers, Chase said “If we think you’re making a payment related to crypto assets, we’ll decline it.” The new rules will come into force on October 16, it added.

“If you’d still like to invest in crypto assets, you can try using a different bank or provider instead – but please be cautious, as you may not be able to get the money back if the payment ends up being related to fraud or a scam,” the email continued.

In a statement  explaining the rationale behind the ban, a Chase spokesperson said “we’ve seen an increase in the number of crypto scams targeting U.K. consumers.”

As a result, “we have taken the decision to prevent the purchase of crypto assets on a Chase debit card or by transferring money to a crypto site.”

Crypto Ban Latest in String of UK Restrictions

While Chase may be the first UK bank to go as far as imposing a blanket ban on all crypto-related transactions, others have set their own restrictions on customers’ freedom to buy crypto.

For example, HSBC and Nationwide have moved to prevent customers from using a credit card to purchase cryptocurrency. 

Meanwhile, NatWes t and Santander  have capped how much money people can transfer to crypto exchanges. Both banks impose a daily limit of £1000 and a rolling 30-day limit of £5000 and £3000 respectively.

UK Regulator Gets an Updated Mandate

On the surface, UK banks have moved to inhibit crypto transactions to protect consumers from fraud. However, there is good reason to believe that pressure from regulators has been a catalyst for action.

Until recently, the  Financial Conduct Authority (FCA) had limited powers to regulate the crypto sector besides issuing warnings and publishing advice.

However, this year, the UK government passed the Financial Services and Markets Act (FSMA), expanding the FCA’s regulatory perimeter to include crypto asset activities.

When it comes to how banks treat crypto payments, one of the most significant changes to the FCA is the introduction  of the “Consumer Duty,” which came into force in July.

Under the Consumer Duty, FCA-regulated firms are subject to a higher standard of care for consumers. And if the regulator deems that they have failed to meet consumer protection standards, banks and other financial institutions may be liable to pay a fine.

Changes to Fraud Reimbursement Regime

Away from the FCA, the Payment Systems Regulator (PSR) has also ramped up the pressure on banks to protect customers from fraud.

Following provisions in the FSMA, in July, the PSR confirmed  that Authorized Push Payment (APP) fraud victims will be entitled to claim back money lost to scams.

Previously, banks were only liable to reimburse fraud victims if they didn’t authorize a payment. But under the new regime, all fraudulent payments are subject to compensation schemes, even those authorized by the scam victim.

More than any other changes in recent years, the FCA’s Consumer Duty and the PSR’s new APP rules incentivize banks to prevent fraud, given the threat of financial penalties if they fail to do so.

Ultimately, no UK regulator can force banks to stop processing crypto payments. But as long as the sector is associated with heightened fraud risk, Chase and others like it seem to be erring on the side of caution, rather than risk fines for insufficient consumer protection.

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