‘I made $4m profit on crypto, but the bank won’t let me spend it’
Imagine winning the lottery and not being able to spend the winnings. For Britain’s Bitcoin millionaires, who have made vast profits on cryptocurrencies, this is a reality, after being blocked from their own money.
Digital currency traders sitting on huge gains have been turned away by banks, with financial institutions fearing they may be unwittingly taking money from law breakers who use digital currencies to hide wealth illegally.
Cryptocurrencies allow money to be moved around without a bank or any other middlemen being involved. They are virtually anonymous, with transactions recorded on a database known as the blockchain. These are linked to unique reference numbers and not to names, addresses or bank accounts.
But in order to avoid accepting money from criminal gangs using digital currencies to trade drugs and arms undetected, banks have set a number of hurdles for investors to jump before they can move their gains from crypto “digital wallets” to pounds and pence.
It has proved a headache for young enthusiasts who have made vast fortunes, in some cases almost overnight, speculating on the prices of coins such as Bitcoin, Ethereum and Solana.
Vincent Fraysse*, 36, originally from France but now living in London, managed to turn €3,000 (£2,500) into $4m (£3.9m) betting on movements in markets. He now works for a cryptocurrency hedge fund, but said it took him two years to move his crypto profits into sterling and start spending it.
“After finally finding a bank which would take me on as a client there was about seven months of vetting, then when I finally managed to get some money out and into a bank account that would actually allow me to use the money, the bank blocked the account to carry out more checks,” he said.
Clive Gawthorpe of accountant UHY Hacker Young said traders face long waits of up to 24 months to access their own money, with tax an increasing concern for banks. “Every time they trade in and out of a coin they trigger a taxable event, some dating back years – and we are talking about thousands of transactions without proper record keeping,” he said. “I have one client who has made £25m and he is just 19.”
Chris Etherington of RSM UK, another tax firm, said the issue of proving tax has been paid is compounded by the fact that some traders use “robo trading” software, which makes automatic trades based on market fluctuations. “There are sometimes millions of transactions to go back through and working out the tax position is next to impossible,” he said. “I have a client who has made around two million trades in a year.”
Nimesh Shah of Blick Rothenberg, an accountant, said he has received an increasing number of referral calls from private banks wanting to take on newly rich clients, but first asking for help to “clean up” their tax records.
Another trader, 29, from Leicester, is also facing problems. He made around £250,000 from an original £5,000 investment and quit his accountancy job to set up his own crypto trading company. But he found that no banks will allow him to set up a business account for his venture. “They have basically put a pseudo ban on people using business accounts as a repository for crypto profits,” he said.
Telegraph Money previously reported how even those who successfully accessed their gains have faced hurdles purchasing property, as conveyancers have refused to work with them over money-laundering fears.
*Mr Fraysse spoke under a pseudonym in order to protect his assets from becoming the target of fraudsters
