Credit Cards Will Not Process Crypto Purchases
Bank of America, Citigroup Inc., and JP Morgan Chase will no longer allow people to purchase cryptocurrencies using their credit cards. According to a JP Morgan representative, they’ve decided to halt crypto purchases with credit cards because of the extreme volatility exhibited by cryptocurrencies. The bank also thinks that dealing in cryptos is too risky at this time, and does not want to take the “credit risk” involved in crypto-related transactions. However, the representative also said, “We will review the issue as the market evolves”. So, we can assume that this might not necessarily be a permanent decision.
Many other large banks have also decided to not let their credit cards be used for cryptocurrency purchases. Notably, Capital One Financial blocked all credit card transactions involving cryptocurrencies earlier this month. Per the company, the decision was made due to a lack of mainstream adoption of cryptos and “elevated risks of fraud, loss, and volatility inherent in the cryptocurrency market”. Meanwhile, Discover Financial Services has prevented its credit card holders from using their cards to buy cryptos since 2015.
Scope Of Restrictions
Bank of America’s ban on cryptocurrency purchases, which it announced in an internal memo sent out to its employees, only applies to credit cards. For now, at least, the bank’s customers can buy cryptocurrencies using their ATM or debit cards. According to Bank of America, credit cards have the potential to be used for money laundering. Moreover, the bank wants to remain compliant with anti-money laundering regulations, and prevent stolen cards from being used to buy crypto.
In order to further clarify the scope of these restrictions, it must be noted that credit card purchases involving cryptocurrencies have only been halted if they are from known sources. Therefore, known sources for crypto would probably include large exchanges such as Coinbase, Binance, Bittrex, etc. Generally speaking, financial institutions fear that customers could abuse their cards by buying more cryptocurrency than they might be able to afford.
More Restrictions on Crypto Purchases in the Future
UBS Group AG, a Swiss global financial services company, discussed crypto purchases with its employees. Per UBS, “At present the Global Policy on Personal Investment is silent on cryptocurrencies and thus disclosure and pre-clearance is not required” under most circumstances. However, the financial institution also mentioned that this is subject to change in the foreseeable future. The company might also require its staff members to obtain permission before engaging in crypto-related activity with their personal accounts.
The crackdown on cryptocurrencies has never been stronger. Countries like South Korea and China have been trying to place all sorts of restrictions on crypto-trading for months. India’s Finance Ministry has threatened to ban cryptocurrencies completely, and Facebook is moving towards banning cryptocurrency Ads. Clearly, cryptos are being scrutinized worldwide. The primary concerns authorities have regarding digital currencies is that they can be used for tax evasion, money laundering, or even to fund terrorism. Nevertheless, there might be light at the end of tunnel if crypto-related technology can continue to grow, evolve, and improve. Hopefully, in the future, the crypto technology could have intrinsic security features which would make it difficult for it to be used for illegitimate activities.