Lloyds and Virgin Money ban credit card users from buying Bitcoin
Banking giant Lloyds said across its brands – Lloyds Bank, Bank of Scotland, Halifax and MBNA – it will not accept credit card transactions involving the purchase of cryptocurrencies.
Virgin Money said following a review of its policy, customers will no longer be able to use its credit cards to purchase virtual currencies such as Bitcoin. However, there’s no such ban on debit cards.
The head of the Bank for International Settlements (BIS) this morning called for a regulatory clampdown on cryptocurrencies, which led to Bitcoin’s price tumbling below the $7,000 mark.
Citizens Advice chief executive, Gillian Guy, welcomed the move from the banks. She said: “This shows recognition of the risks of credit card customers running up debt they can’t afford – something that Citizens Advice sees the impact of every day.”
However, David Coker, lecturer in accounting, finance and governance at Westminster Business School and former vice president of global risk management at Deutsche Bank, believes that despite sharp drops in price and growing hostility from banks and regulators, the Bitcoin market is maturing.
He said: “Cryptocurrency naysayers have been given great energy of late on account of the recent price corrections and the decision of a number of banks and financial institutions, including Lloyds Bank and Virgin Money, to ban credit card customers from charging Bitcoin purchases.
“In truth these events are nothing more than a further sign that the Bitcoin market, and cryptocurrencies in general, are maturing; in other words, business as usual and much ado about nothing.”
He added that if looking at Bitcoin as a new asset class exhibiting characteristics of both commodities and currencies, prohibiting credit card customers from charging their purchases of Bitcoin “makes good sense and is a sign that the market is adapting to the peculiarities of cryptocurrencies, without the need for top down regulation”.
Coker said: “For example, without prior arrangement most credit cards won’t allow cash advances and even those that do typically limit the amount that may be realised in cash. These limits are always a small fraction of total available credit. This is done to protect the lending institution from outright fraud by customers who might walk away with the cash then refuse to pay.
“The same principle applies here with Bitcoin. Banks are notoriously slow to move in ways that might restrict revenue. And credit cards are big revenue generators for many financial institutions. At the same time, banks must act to control losses. Many institutions have realised Bitcoin has generated significant attention because many customers have charged their purchases. Banks, concerned some of these same customers may refuse to pay, are simply limiting their exposure.”