Sunday, March 29, 2020

Banks Crack Down On Buying Cryptocurrency With Credit Cards

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Banks are banning cryptocurrency purchases on credit cards because they fear they will be left holding huge debts if something goes wrong with the transaction.

The banks and card issuers have concerns about how they can manage cryptocurrency issues.

The major worry is that customers could buy into a cryptocurrency, such as bitcoin or ethereum, and lose all their money if the value tanks.

Other problems include tracking money laundering, which is difficult within the unregulated blockchain that tracks cryptocurrency transactions and dealing with alleged identity theft and fraud.

A growing list of banks are blocking cryptocurrency transactions, including JP Morgan, the Bank of America and Citigroup in the US.

Banks fear unregulated trading

In Britain, Lloyds Bank, which also operates other banking brands like the Bank of Scotland and the Halifax is taking similar action, as is the Royal Bank of Scotland and the NatWest.

“Across Lloyds Bank, Bank of Scotland, Halifax and MBNA, we do not accept credit card transactions involving the purchase of cryptocurrencies,” said a spokesman for Lloyds Banking Group.

Card issuers Capital One and Discovery have had a no digital currency policy for a while.

Card giant Mastercard says transactions were up a fifth around the end of 2017 due to customers buying in to cryptocurrency, but that trend was dropping off.

Although all credit card transactions are blocked, customers can still buy cryptocurrency on their debit cards as different banking rules apply to these.

Governments call for controls

A huge plunge in value in the past month has prompted the move by the banks. Bitcoin started 2017 valued at $900 and surged in price to around $20,000 in December. Since then, the value has plummeted by more than half to $8,000. Other popular digital currencies have also seen their value reduce by more than half in recent weeks.

Recently, British Prime Minister Theresa May has said she is considering new rules to govern cryptocurrency trading in the UK.

“We should be looking at Cryptocurrencies like Bitcoin very seriously, precisely because of the way that they can be used, particularly by criminals,” she said.

US Treasury secretary Steve Mnuchin has made a similar statement.

“My number one focus on cryptocurrencies, whether that be digital currencies or bitcoin or other things, is that we want to make sure that they’re not used for illicit activities,” he said.

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