Coinbase's U.K. Move and Ripple's WU Pact Advance Digital Money Tech

Coinbase, a U.S.-based Bitcoin exchange with many prominent merchant clients, spread its services into the U.K. where bankers and regulators have been more welcoming of digital currency innovations.

The Coinbase move will advance the use of digital currency internationally — particularly in regions where banks and regulators are more receptive to the technology than in the U.S. — but falls short of Bitcoin advocates' ultimate goal: “To have Faster Payments deposits into U.K. bank accounts,” said Hugh Halford-Thompson, a London-based entrepreneur who founded QuickBitcoin.co.uk, a Bitcoin brokerage, in April 2013.

And as Coinbase makes its services available in the U.K., Ripple Labs, the company that manages the Ripple payment protocol based on distributed consensus, is making inroads with Western Union.

Chris Larson, who heads Ripple, told the audience at the Milken Institute’s Global Conference 2015 yesterday that it is working on a pilot with Western Union "to provide infrastructure for real-time settlement." Western Union would not comment at this time since the company is in a pre-earnings quiet period.

Both companies' moves are significant, Halford-Thompson said.

“It’s exciting to see Coinbase turning up in the U.K. and it’s interesting that they couldn’t get a bank account,” Halford-Thompson said. The five clearing banks don’t want anything to do with Bitcoin, he said, even though their representatives sit on panels at fintech conferences touting the disruptive force of blockchain, Bitcoin's underlying distributed public ledger technology.

Banks throughout Europe, including Fidor Bank AG, Barclays and Santander, have been vocal about the potential of Bitcoin and its underlying technology.

If Coinbase could get connected to the U.K.'s Faster Payments System —managed by bank and building society-owned VocaLink — it would be able to transfer fiat currency into Bitcoin and vice versa nearly instantaneously. And those transactions would be guaranteed within two hours.

But for now, to deposit GDP or USD into Coinbase, consumers must use bank wire transfers. To deposit euro, consumers can send through SEPA, a low-cost account to account transfer comparable to ACH in the U.S.

“The [thing] to really make Coinbase expand and take the U.K. market is if you can get a U.K. bank account,” Halford-Thompson said. “In the U.K. there are large financial companies, like hedge funds or investment funds that want … to trade bitcoin … but don’t want to put their money abroad.”

Coinbase declined to provide a spokesperson, but said it has no employees in the U.K. yet.

Coinbase allows people in the U.K. to  buy and sell bitcoin using pound sterling (GDP) through the Coinbase Wallet and to trade bitcoin on Coinbase Exchange. In addition, the U.K. service allows for BTC/GDP currency pairs and GDP/EUR currency pairs.

In the U.K. and more broadly within the European Union, requirements on money transmitters are less burdensome than in the U.S. When a business gets a money transmitter license in an EU country, it can then operate in other EU countries. In the U.S., money transmitters must go state-by-state obtaining licenses.