Another blow for the crypto-traders: A sizable number of banks are not allowing their customers to use their credit cards to buy cryptocurrencies. This had been triggered over the weekend when U.S. banks Bank Of America, Citigroup, JP Morgan, Capital One and Discover banned their customers from purchasing cryptocurrencies. But take this declaration with a pinch of salt. Could there be something bigger coming? We know that JP Morgan, Berkshire Hathaway and Amazon teamed up to form an independent health care company. Nothing can be factored out, but let’s stay with the subject on hand.
Back in January, Visa ended it’s relationship with a renowned cryptocurrency currency card provider and thousands of people suffered as a result of that. This, however, was a one-off case, where Wave Crest didn’t comply with Visa’s rules and the company pulled the plug. Nonetheless, the news created enough bad press and gave traders the notion that cryptocurrencies would perhaps not be that easily transferred to fiat or readily spendable.
In the U.K., the first announcement came from the Lloyds banking group. The ban expands to MBNA, Halifax, Bank of Scotland customers. Crypto exchanges, such as Coinbase. allow users to fund their crypto accounts by using credit cards. However, exchanges typically have daily limits. This limit does not allow users to fund their account more than £500 per day if you are funding your account in GBP.
Bank’s have been against the concept of the cryptocurrency and only now they are catching up with the concept of the blockchain technology. Remember, Bitcoin brought the blockchain technology on everyone’s radar. Banks have used excuses such as higher volatility and money laundering to play down the concept of cryptocurrency, particularly Bitcoin. In the U.K., some institutions have already made headlines by not approving mortgages for those customers who have made their capital gain by investing in Bitcoin and other Altcoins. For me, the message from the banks was that they are using this as a cover by saying that the source of funds can’t be verified when in fact they have no clue how to factor that into their accounts.
Remember that the crypto-mania is driven by retail investors and these retail clients do use their credit cards and debit cards to fund their account at various different exchanges. Speculation that credit gives you more security against fraud and hence the idea that clients use these instead of debit cards doesn’t have much merit. Visa has its protections, and it doesn’t make much difference if you spend that under credit card label or debit card.
Perhaps, banks are trying to limit their exposure to Bitcoin and letting clients use their funds to gamble. Lloyds banking group’s initiative in the U.K. on Monday could only be a start and other major banks could also be looking to adopt the same path. The ban so far is only limited to eight million credit card customers.
But here is a big question: Should these banks be allowed to control one’s transaction when they already have approved their account?