UPDATE 1-Barclays ends partnership with cryptocurrency exchange Coinbase- sources

* Bank ends partnership with crypto exchange - sources

* Tie-up helped Coinbase users buy cryptocurrencies

* Banks tread carefully in crypto world amid regulatory concerns (Adds industry body comment)

By Tom Wilson and Lawrence White

LONDON, Aug 14 (Reuters) - Barclays is no longer providing banking services to major cryptocurrency exchange Coinbase, sources familiar with the matter told Reuters, ending a relationship that started in March last year as the exchange expanded in Europe.

The rare deal between the San Francisco-based exchange and the British bank made it easier for Coinbase users to buy cryptocurrencies with pounds and withdraw their funds.

Barclays declined to comment, while Coinbase did not respond to repeated requests for comment. The news was first reported by industry website CoinDesk on Wednesday.

Large global banks have been reluctant to do business with companies that handle bitcoin and other digital coins because of concerns they are used by criminals to launder money and that regulators will soon crack down on them.

Three-quarters of cryptocurrency businesses in Britain are forced to bank overseas due to the difficulty of getting banking services onshore, a survey by industry body CryptoUK reported last month.

Even crypto-related firms that don't handle digital coins, such as web designers, typically face problems in opening bank accounts, CryptoUK chair Iqbal Gandham told Reuters. The association itself could not get an account with a major UK bank, he said.

The challenges lead to extra operational costs and often force British firms to seek accounts overseas, Iqbal said, adding the industry was unclear on what steps it needed to take in order to get easier access to banking.

"We have got this traditional industry sitting there, and saying they are not interested," he said. "We need to sit down and ask what do they want, what are they waiting for?"

Coinbase's chief executive for the UK, which is its biggest European market, said in March 2018 the deal with Barclays had taken some time to sign because the bank needed to be sure that Coinbase had the right systems in place to prevent money laundering.

Cryptocurrencies are largely unregulated in Britain and across Europe, but Coinbase is licensed to provide fiat currency-related services across 23 EU countries. Many customers deposit fiat money - currency that a government has declared to be legal tender - at Coinbase before buying and selling cryptocurrencies.

While big banks remain reluctant to become too closely involved in the plumbing behind the global crypto market, large companies and venture capital funds are pouring money in, Reuters reported in April. (Reporting by Tom Wilson and Lawrence White; Editing by Stephen Powell and Mark Potter)