Bitcoin exchange reaches deal with Barclays for UK transactions

* Coinbase one of the biggest bitcoin exchanges

* Banks reluctant to do business with crypto

* Regulators warn about money laundering risks for sector

By Tommy Wilkes and Emma Rumney

LONDON, March 14 (Reuters) - One of the biggest bitcoin exchanges has struck a rare deal which will allow it to open a bank account with Britain's Barclays (LSE: BARC.L - news) , making it easier for UK customers of the exchange to buy and sell cryptocurrencies, the UK boss of the exchange said 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.

San Francisco-based exchange, Coinbase, said its UK subsidiary was the first to be granted an e-money licence by the UK's financial watchdog, a precursor to getting the banking relationship with Barclays.

The Barclays account will make it easier for British customers. Previously, they had to transfer pounds into euros and go through an Estonian bank.

"Having domestic GBP payments with Barclays reduces the cost, improves the customer experience...and makes the transaction faster," said Zeeshan Feroz, Coinbase's UK CEO.

The UK is the largest market for Coinbase in Europe, and the exchange said its customer base in the region was growing at twice the rate of elsewhere.

Feroz said that it took considerable time to get a UK bank on board, partly because Barclays needed to be sure that Coinbase had the right systems in place to prevent money laundering.

Regulators across the globe have warned that cryptocurrencies are used by criminals to launder money, and some exchanges have been shut down.

"It's a completely brand new industry. There's a lot of understanding and risk management that's needed," Feroz said.

Despite growing interest in both digital currencies and the technology behind them, some big lenders have limited their customers ability to buy cryptocurrencies, fearing a plunge in their value will leave customers unable to repay debts.

In February, British banks Lloyds and Virgin Money said they would ban credit card customers from buying cryptocurrencies, following the lead of JP Morgan and Citigroup (NYSE: C - news) .

Coinbase said it had also become the first crypto exchange to use Britain's Faster Payments Scheme, a network used by the traditional financial industry. (Reporting by Tommy Wilkes and Emma Rumney; Editing by Elaine Hardcastle)