UK Finance has told Parliament’s Crypto and Digital Assets All-Party Parliamentary Group (APPG) that banks are not shutting out crypto firms as a sector, and that their limits on crypto payments are driven by fraud risk, including scam losses they can be ordered to refund.
In a letter dated October 5, UK Finance Chief Executive David Postings replied on behalf of the banking sector to the “Dear CEO” letter that APPG co-chairs Gurinder Singh Josan MP and Lord Vaizey of Didcot sent to the heads of all major UK banks on August 11. Postings said the letter should be read alongside, not in place of, individual responses that members are providing directly.
Six Questions to Bank CEOs, a Sector Reply
The August letter asked each bank to set out its policy on serving crypto firms, whether it currently does so, what limits it applies to crypto-related transactions, what drives that approach, whether the FCA’s new regime will change it, and what the Government or regulators could do to help. It came weeks after the APPG launched its inquiry into banking access for the sector, which took written evidence until August 31 before reporting to the Government.
Postings wrote that decisions to bank individual crypto firms are a matter for each bank, based on risk, commercial considerations, and legal requirements. Banks assess prospective FCA-licensed customers in the cryptoasset sector individually, weighing anti-money laundering (AML) and know-your-customer (KYC) obligations alongside the firm’s governance, business model, and risk profile. Higher-risk firms can face more intensive due diligence, transaction monitoring, and suspicious activity reporting.
He said that approach “should not be confused with a blanket exclusion,” pointing to regulated banks and specialist non-bank providers that already offer crypto firms fiat accounts, settlement, custody, and institutional trading and liquidity services. The position matches UK Finance’s November 2023 reply to the APPG’s previous chair, in which Postings said the association is not able to set its members’ risk appetite.
Investment Scam Losses Rose 40% in 2025
Regarding restrictions on customers sending money to crypto platforms, UK Finance said the measures vary by bank and reflect each lender’s assessment of fraud risk. The letter ties that caution to liability. Postings said Financial Ombudsman Service decisions have required banks to reimburse customers in some cryptoasset investment scams, including where the customer first moved the money to their own account at a legitimate crypto exchange and the loss occurred only after it was sent on from there. UK Finance said that exposure is one reason banks run checks and step in when they spot heightened risk.
The letter cites the Government’s 2025 National Risk Assessment, which identified the increasing use of cryptoassets to launder proceeds of crime. That assessment reclassified cryptoasset service providers from medium risk in 2020 to high risk in 2025 for money laundering. Separately, the Financial Action Task Force’s July 2026 targeted update on virtual assets reported that 83% of surveyed jurisdictions had passed laws implementing the travel rule, which requires crypto firms to share sender and recipient details on transfers. The Financial Action Task Force said enforcement experience remains limited, with almost half of the jurisdictions that have introduced the rule not yet having taken any supervisory or enforcement action.
According to UK Finance, crypto-related investment fraud accounted for nearly a fifth of reported investment fraud losses. Its Annual Fraud Report 2026 found investment scam losses rose 40% in 2025 to a record high, while total fraud losses reached almost £1.3 billion. Postings added that the FCA’s Consumer Duty requires banks to act to avoid foreseeable harm to retail customers.
FCA Authorisation Gateway Opened September 30
UK Finance said it agrees with the Government that FCA-licensed firms should not face restrictions simply because of the sector they operate in, a position that Economic Secretary to the Treasury, Lucy Rigby, set out to Parliament in March. The FCA’s authorisation window runs from September 30, 2026, to February 28, 2027, with the new regime taking effect on October 25, 2027.
UK Finance did not say whether banks will change their approach once the regime is live. Postings wrote only that a clear framework should give banks more certainty when assessing applicants and “may help build confidence” in serving the sector.
The trade body argued that crypto firms exposing consumers to comparable risks should carry the equivalent requirements and consumer protections, including fraud prevention and reimbursement, so that liability does not fall disproportionately on the customer’s bank. It asked HM Treasury, the Bank of England and the FCA to keep advancing the cryptoasset and stablecoin framework. The trade body also called on the Government to support consistent implementation of Financial Action Task Force standards across jurisdictions, with priority given to harmonising the travel rule. It urged parliamentarians to back the provisions of the Financial Services and Markets Bill intended to align the Financial Ombudsman Service more closely with the FCA’s rules.
UK Finance also restated its support for the Great British Tokenised Deposit initiative. Last month, UK banks completed their first live customer transactions using tokenised sterling deposits.
Author: Ayanfe Fakunle
The editorial team at #DisruptionBanking has taken all precautions to ensure that no persons or organizations have been adversely affected or offered any sort of financial advice in this article. This article is most definitely not financial advice.
