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Revolut, Britain's most valuable fintech company, could face disappointment as the Bank of England plans to reject its application for a banking licence.
The Prudential Regulation Authority, responsible for licensing, has informed the government of its intention to issue a statutory warning notice to Revolut, citing concerns over the company's balance sheet. Revolut contends that auditors' concerns were related to revenues, not the balance sheet.
According to a report in the UK Telegraph, the warning notice has not been served yet and urgent talks are underway behind the scenes in an effort to salvage the licence application.
Revolut, an app offering many financial services, has expanded globally, making it one of the world's most valuable fintech firms and Britain's most valuable tech start-up.
Despite already holding a Lithuanian banking licence, securing approval from the Bank of England has been seen as a crucial stepping stone for Revolut to expand into other jurisdictions.
Revolut had expressed confidence in obtaining a UK licence, but recent challenges have cast doubt on its prospects. The company's auditors, BDO, raised concerns about the “completeness and occurrence” of revenues amounting to £477 million.
CEO Nik Storonsky voiced frustration with British regulators, citing long wait times for communication and an overly bureaucratic regulatory environment, suggesting that the company may be more inclined to go public in the US rather than the UK.
The on-going saga of Revolut and of several other crypto-related companies wishing to receive licences in the UK appears to have no end. The UK is an incredibly conservative nation with traditional banking etched into its genes.
It’s all very well for the government, or at least parts of it, to say that the UK wants to become a global hub for crypto. Many pro-crypto utterances and promises appear to be made in the political and international spheres, but the UK will have to contend with its deeply embedded banking industry, which has much power and influence over regulators and in the country’s parliament.
The US also has massive influence in the UK, and its very harsh treatment of crypto is likely to be accompanied by much lobbying of the British government for it to go back on many of the pro-crypto promises it has made so far.
However, with Brexit forcing the UK to look for new markets, it still has a great opportunity to land a big chunk of crypto business and become the premier safe harbour for digital assets in Europe. The internal battle over crypto legitimacy in the UK will be very interesting to witness.