Banks in the UK and the US have banned the use of credit cards to buy Bitcoin and other cryptocurrencies, fearing a plunge in their value will leave customers unable to repay their debts.
Lloyds Banking Group, Britain’s biggest lender, said it would ban its credit card customers from buying cryptocurrencies, following the lead of US banking giants JP Morgan Chase and Citigroup.
The move is aimed at protecting customers from running up huge debts from buying virtual currencies on credit if their values were to plummet, a Lloyds spokeswoman said. Concerns have arisen among credit card companies because their customers have increasingly been using credit cards to fund accounts on online exchanges, which are then used to purchase the digital currencies.
Last week Mastercard, the world’s second-biggest payments network, said customers buying cryptocurrencies with credit cards fuelled a 1% increase in overseas transaction volumes in the fourth quarter. At that time Bitcoin was staging a spectacular rise in value, reaching a peak of $19,187 (€15,454) in December on the Luxembourg-based Bitstamp exchange.
However, the biggest and best-known cryptocurrency has since fallen dramatically and was down by 6% yesterday on Bitstamp, extending losses from Friday amid worries of a global regulatory clampdown.
A spokeswoman for Chase bank said it is not processing credit card purchases of cryptocurrencies because of the volatility and risk involved, while a Citi spokeswoman confirmed a similar ban but did not give a reason.
The bans extend only to credit-card purchases, with debit card users still able to buy cryptocurrencies.
“Across Lloyds Bank, Bank of Scotland, Halifax and MBNA, we do not accept credit card transactions involving the purchase of cryptocurrencies,” the Lloyds spokeswoman said.
Lloyds did not say how it planned to enforce the ban, although reports have suggested that its credit-card customers will be blocked from buying Bitcoin online through a blacklist that will flag sellers. Concerns about the use of Bitcoin and other such currencies extend beyond the use of credit cards for borrowing.
UK prime minister Theresa May has said that the UK should take a serious look at digital currencies such as Bitcoin because of the way they can be used by criminals.