Barclays is taking sterling deposits for a new bitcoin exchange, making it the only UK bank to do so currently.
Banks in the UK have avoided working with bitcoin exchanges so far, but customers of new bitcoin exchange Bit121 can deposit their sterling to a Barclays account with a Canary Wharf address.
The account belongs to a payment service provider called PacNet Services Ltd, which Bit121 works with. Barclays therefore does not have a direct relationship with the bitcoin exchange.
When contacted, Barclays refused to comment on its policy towards working with bitcoin exchanges.
Daniel Hunter, head of external communications at Barclays Corporate Banking explained:
“Bit121 do not bank with Barclays. Rather, they use a payment service provider who does. I am thus unable to help you with this as Bit121 is not our client.”
When asked if this statement meant that Barclays approved of working with bitcoin exchanges through a payment service provider, Hunt replied:
“This isn’t an area we wish to comment on.”
Bit121 started trading on 11th November and chief executive Jim Iddiols said daily average trading volume stands at about £100,000 from more than 500 registered users.
Registration is free and Bit121 accepts sterling-denominated bank transfers to the Barclays account. Users must complete an ‘account verification’ form before the exchange will approve a transfer. The form requires the user’s name, address and bank account number, among other details.
The exchange also refuses to accept cash deposits. Iddiols said these measures were in place because his firm wanted to voluntarily comply with anti-money laundering rules in the UK. He added that information like customer bank account numbers were needed to process withdrawal requests.
The Bit121 site is not very forthcoming with contact details – there is an email address on the ‘Contact’ page, but no address or phone number.
When CoinDesk checked the site on 28th November, users were asked to transfer funds to a Barclays account belonging to PacNet Services Ltd. The account’s address was listed as a Barclays address at Canary Wharf in London.
But three days later, on 2nd December, the page had been changed.
Barclays’ name and address had been removed from the fund transfer page. The account number remained the same. Iddiols confirmed that Bit121 had removed mention of Barclays from its site.
Iddiols confirmed that his firm has no direct relationship with Barclays. He said Bit121 worked with PacNet Services and that firm, in turn, had accounts with a number of banks, including Barclays.
“All funds are managed by PacNet Services. Effectively, we don’t touch them.”
Iddiols said that Barclays had contacted him after CoinDesk inquired about the exchange with Barclays. However, he said that Barclays and PacNet Services were aware that Bit121 operated a bitcoin exchange.
Bit121’s chief executive explained:
“We have been completely open and transparent with PacNet, and they have been completely transparent with Barclays,”
“They absolutely know what business we are in.”
PacNet Services lists its European address in County Clare, Ireland. It was founded in 1994 in Vancouver, according to its website.
Pacnet Services describes itself as the world’s leading provider of international payment processing services to the direct response industry. Its services include allowing merchants to process direct debit requests, cash cheques and accept credit cards.
Bitcoin exchanges in the UK have failed to find banks that want to work with them. Tom Robinson, who has yet to launch his own exchange BitPrice, said he was “surprised” that Bit121 was successfully taking deposits through a local bank.
He said he had been turned down by “numerous” UK banks, including Barclays, when he approached them as a banking partner to BitPrice:
“[UK banks] have had a blanket policy of saying ‘no’ to bitcoin.”
Robinson said he had also looked into using a payment services company, as Bit121 is doing. He concluded that the method wouldn’t work for his company:
“Ultimately you are a client to the bank, and when the bank finds out that the service relates to bitcoin, they are not happy with it.”
Robinson said he is now lobbying UK regulators and banks to “open up” bitcoin services before he launches his exchange.
Bit121 has suffered several glitches since its launch. On 28th November it halted trading for an hour after a user suggested its trading engine had been “miscalculating”, according to Iddiols.
The exchange was shut down while the matter was investigated and trading resumed after investigations revealed that the trading engine’s calculations had been correct all along, Iddiols said.
“At first glance, we agreed with [the user], but when we investigated, everything was working perfectly.”
The exchange also sent out a promotional e-mail that mistakenly contained a list of user’s e-mail addresses on the same day.
Despite the glitches, Iddiols said he is confident in Bit121’s security measures. These measures include a cold storage policy, two-factor authentication and e-mail verification for withdrawal requests.
Iddiols also said the exchange keeps a a very small number of bitcoins in its hot wallet, or the temporary bitcoin storage facility used by exchanges that has been the target of break-ins recently.
Iddiols said he had been working on Bit121 since March. He was previously a sales director at IBM, where he worked for 27 years, according to the description on his site.
The exchange is funded by Nicholas Dann, who was Iddiols’ colleague at IBM, and who is now an entrepreneur and property developer. A third person, Mark Vickery, is listed on the site as a director of the firm. He owns ABL Resourcing, a financial consulting firm.
Those looking to use a UK exchange to swap their sterling to bitcoins and vice-versa are advised, as usual, to exercise their own due diligence before parting with any currency.
It’s advisable to monitor reddit and the Bitcoin Talk forum for discussions related to any company you’re considering using in the bitcoin space.
Check out CoinDesk’s guide to buying bitcoins in the UK for an overview of where you can purchase them.