The Bank of England and the Financial Conduct Authority have tightened the United Kingdom's regulatory framework for cryptoassets, but banking-sector caution toward digital-asset businesses is likely to persist, The Banker reports.

The UK has spent the past several years building out a bespoke regime for the sector. Parliament passed the Financial Services and Markets Act 2023, which brought cryptoassets and broader activities within the regulatory perimeter of the FCA and the Bank of England. Since then, the FCA has consulted on and phased in rules covering fiat-backed stablecoins, cryptoasset promotion and, most recently, a broader authorization regime for crypto firms operating in the UK market.

The theory behind this legislative push is straightforward. If crypto businesses operate under a clearly defined, fully authorized regulatory perimeter, banks should feel more comfortable providing them with accounts, payment services and credit facilities. De-risking — the practice of banks terminating or refusing relationships with entire sectors viewed as high-risk — has been one of the most persistent operational complaints from UK crypto firms. Losing access to banking services constrains a company's ability to run payroll, hold customer funds and process fiat on- and off-ramps.

Yet the regulatory upgrade may not move the needle, and the reasons lie in how banks manage risk rather than in how regulators define it.

First, anti-money-laundering and counter-terrorist-financing obligations bind banks independently of the FCA's crypto regime. A crypto firm can hold FCA authorization and still present a bank's financial-crime team with a customer profile it cannot reconcile with transaction-monitoring systems. Banks answer to their own supervisors — including the Prudential Regulation Authority and, for AML matters, the FCA — and the cost of getting a risky client relationship wrong, in fines and remediation, far exceeds the revenue a mid-sized crypto firm generates.

Second, the liability asymmetry remains. When a bank onboards a client that later becomes an enforcement headline, the bank carries the reputational and regulatory damage. Authorization of a crypto firm by the FCA does not transfer that exposure away from the bank.

Third, operational costs are real. Monitoring crypto-linked flows requires specialized capabilities that many relationship banks have not built, and hiring or buying that expertise for a client base that remains small relative to other sectors is a weak business case.

The consequences for the market are structural rather than price-driven. Crypto firms that cannot obtain UK banking relationships face higher operational friction and may route fiat services through jurisdictions with more accommodating banking sectors, which pushes activity — and the associated jobs and tax revenue — outside the UK even as the regulatory framework at home becomes clearer. Payment institutions and EMIs have partially filled the gap, but their services typically cost more than conventional bank accounts and add counterparty risk.

For banks, the calculus is unlikely to shift until the regulatory track record matures. A regime that has been live for only a short period offers few enforcement precedents demonstrating how supervisors will treat banks that serve authorized crypto clients. Each year without a high-profile AML failure inside a supervised crypto firm strengthens the case for normalizing access; each scandal sets it back.

The FCA's ongoing rollout of its full cryptoasset authorization regime, with further rules and transition deadlines still ahead, will define the compliance obligations firms must meet. Whether the banking sector treats that regime as sufficient grounds to re-engage remains the open question — and on current evidence, the UK's clearer rulebook is a necessary but not sufficient condition for restoring crypto firms' access to bank accounts.