Coinbase, the most popular online platform for exchanging and storing cryptocurrency, has warned that many major American banks are blocking the purchase of digital currency with credit cards. Customers of Chase, Bank of America, Citi, and Capital one will have to use alternate ways to purchase cryptocurrency. Coinbase is encouraging their customers to use debit or bank account payment methods instead, as these payment channels are still available.
Concerns About Debt and Criminal Activity
This news won’t come as a surprise to many of you. Bank of America released a statement in early February announcing their intentions to ban bitcoin purchases with credit cards. The bank has already been declining credit card purchases of cryptocurrencies since the beginning of the month.
The banks involved are citing a couple of reasons for this move. First, they’re worried about the possible debts that their customers will run themselves into if cryptocurrency prices drop. This is a heightened concern since bitcoin reached its lowest point in the last three months when it hit $6,000 this morning.
Financial institutions are concerned that people are purchasing more cryptocurrency than they can afford. As money lenders, they’re negatively affected when borrowers cannot afford to repay what they owe. This issue follows the increasing popularity of bitcoin as people jump on the chance to make some easy money. For example, Mastercard Inc. stated that their customer spending has risen 22 percent this year, a number they attributed at least in part to digital currency purchases.
The Bank of America also mentioned money laundering regulations in relation to their decision. Banks are required to monitor transactions for evidence of money laundering. This is much more difficult with digital currency due to the pseudonymous and encrypted nature of the transactions. Additionally, banks are worried about stolen credit cards being used as cryptocurrency stashes.
Other Banks Are Still Being Cautious
Banks that aren’t blocking credit card purchases may still be adding charges to cryptocurrency transactions. A change to the MCC code, the merchant category code that reveals the type of transaction that occurred, is allowing banks to charge cash advance fees for cryptocurrency purchases.
On the other hand, banks in Canada and Australia are being more lenient. Major Canadian banks are still allowing cryptocurrency purchases with credit cards. For example, Toronto-Dominion Bank permits digital currency purchases while the Royal Bank of Canada has stated that they allow such purchases under limited circumstances. These banks, including the Bank of Nova Scotia, report that they are reviewing their policies carefully. Additionally, Australia’s major banks have confirmed that they won’t be banning bitcoin transactions.
As cryptocurrency surges in popularity, authorities and institutions world-wide are intensifying their regulations. Some people in the cryptocurrency community have reacted with skepticism, suggesting that financial systems are fighting the rise of a decentralized system of currency. Whatever the motive, these regulations have the potential to alter the price of cryptocurrencies as it becomes more difficult for people to buy into the market.