A report concentrating on the cryptocurrency and blockchain markets in the UK has revealed many businesses are turning to offshore bank accounts. The research was carried out by Digital Capital in a report called ‘Blockchain in Action: State of the UK Market’. Findings show that companies in this sector are finding it difficult to open traditional bank accounts.
Offshore bank accounts for crypto-businesses
Digital Capital is a digital innovation centre based in the UK. Its report surveyed 264 cryptocurrency related or distributed ledger technology-based businesses, which are divided into four distinct groups.
The categories are decentralised applications developers (dApps), centralised systems including crypto exchanges, service providers like consultancies and VC firms, and distributed ledger companies.
74% of blockchain companies have working applications and products in various sectors. Around 71% of these businesses are reporting revenue generation.
Uncertainty regarding regulatory bodies
Most small businesses working in the crypto and blockchain space have expressed some concern relating to the regulatory environment in the UK. In the same way as many other countries, there is a lack of certainty surrounding this industry.
Almost 75% of those surveyed say that they are not happy with the uncertainty facing the industry. Many concerns centre on the lack of clarity from regulatory bodies and authorities. There is no real consensus on certification, industry standardisation or crypto regulations, which makes it a risky sector to work in.
Other concerns centre on the difficulty in accessing technical advice and expertise, business consultancy or legal help. Almost half of the companies surveyed say that they want more services, particularly with regard to specialist legal services for distributed ledger issues.
Worries over Initial Coin Offerings
SMEs also express concerns surrounding Initial Coin Offerings (ICOs). This way of raising funds has experienced a big surge since 2016, with thousands of companies and projects choosing it as one way to raise money.
The report shows that the UK is second only to the US in terms of the total number of ICOs launched. The UK stands at a 10% share, with the US at 20%. However, out of the 264 businesses surveyed, just 4.5% used an ICO. Instead, around 80% of start-up founders used their own funds to launch their crypto-focused and digital ledger focused companies.
Uncertainty surrounding regulation also affects the entire ICO market. The Financial Conduct Authority (FCA) in the UK is examining regulating the ICO space, but has yet to formulate a framework to cover the legalities.
Problems with opening bank accounts
A key finding from the report relates to the trouble crypto businesses have when they want to open a bank account. More than half of the firms asked say they found it problematic when trying to open a bank account with a legacy financial institution.
Again, this is due to the uncertainty in the sector, particularly when it comes to anti-money laundering (AML) and Know Your Customer (KYC) checks.
James Turner, Managing Director of Turner Little Limited says: “The difficulty accessing a bank account has meant that many businesses in the crypto and distributed ledger space are turning towards opening offshore bank accounts. This allows more freedom and an alternative to the legacy banks, which are unsure about this sector.
“Until there is definitive legislation from the Government and regulatory bodies, there will be more challenges for small business owners in this sector. However, despite this, there is no doubt that the blockchain technology industry has huge potential to completely transform many sectors across the UK.”
About Turner Little
Founded in 1998 in Yorkshire, UK, Turner Little is a specialist UK and offshore company formation, banking and corporate services provider. Our services include company formation, UK and offshore banking, asset protection, credit correction/repair, trademarking and trusts. Other services include Internet services, mail forwarding, wills and probate. Turner Little’s vision is to offer the best possible service, together with market leading products.