Cyprus Mail
Business World

Banks in Britain and US ban Bitcoin buying with credit cards

Banks in Britain and the United States 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 Plc, Britain’s biggest lender, said on Sunday it would ban its credit card customers from buying cryptocurrencies, following the lead of US banking giants JP Morgan Chase & Co 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 providers because their customers have increasingly been using credit cards to fund accounts on online exchanges, which are then used to purchase the digital currencies.

However, other banks said on Monday they will continue to allow credit card customers to buy cryptocurrencies.

“We constantly review our protections for customers as a responsible bank and lender, and are keeping this matter under close review,” a spokeswoman for Barclays said.

“At present UK customers can use both their Barclays debit card and Barclaycard credit card to purchase cryptocurrency legitimately,” she said.

Spain’s second-biggest bank BBVA also said it has no restrictions in place on such purchases.

Last week Mastercard Inc, the world’s second biggest payments network, said customers buying cryptocurrencies with credit cards fuelled a 1 percentage point 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 on Dec 16 on the Luxembourg-based Bitstamp exchange.

But the biggest and best-known cryptocurrency has since fallen dramatically and on Monday was down by 10 per cent to $7345 at 1608 GMT on Bitstamp, extending losses from Friday amid worries of a global regulatory clampdown.

CREDIT RISK

The decision on whether to allow credit card users to buy cryptocurrencies is a credit risk decision made by the card-issuing banks, a spokesman for Mastercard said.

A spokeswoman for Chase bank said it is not currently 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 extends 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 in an email.

Lloyds did not say how it planned to enforce the ban, although the Telegraph newspaper reported on Sunday that its credit card customers will be blocked from buying Bitcoin online through a “blacklist” that will flag sellers.

A spokeswoman from the Royal Bank of Scotland declined to comment on the bank’s policy.

Europe’s biggest bank HSBC did not respond to requests for comment on whether it permits credit card purchases of cryptocurrencies.

Concerns about the use of Bitcoin and other such currencies extend beyond the use of credit cards for borrowing.

British Prime Minister Theresa May has said Britain should take a serious look at digital currencies such as Bitcoin because of the way they can be used by criminals.

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