Late last week, Bank of America and JPMorgan Chase announced that they would no longer allow customers to purchase bitcoin (and other cryptocurrencies) through their credit cards. The banks cited the collapsing price of bitcoin, and the growing credit risk associated with such purchases, in their decision. Over the weekend, Citigroup, Capital One and Discover adopted similar policies. Today, U.K.-based banking giant Lloyds Banking Group — parent company of Bank of Scotland, Halifax and MBNA — announced an identical policy, and was shortly thereafter joined by Virgin Money.The new policy is likely to be enforced through a “blacklist” of existing cryptocurrency brokerages and exchanges. Bank of America began declining bitcoin purchases via credit cards on Friday, with several other providers following over the weekend. It should be noted that the new policies only effect bitcoin purchases via credit card, and that debit and ACH purchases of cryptocurrency remain unaffected. The move places cryptocurrency purchases in the same high-risk category as stocks, mutual funds, casino chips, and money orders, all of which have similar credit card restrictions.
While it’s tempting to see an anti-cryptocurrency conspiracy in these moves, particularly given the recent semi-hostile reaction to bitcoin topics at the recent World Economic Forum in Davos, the real motivations behind the “ban” are far more mundane. Speaking with the BBC, a representative from Barclays — a bank which still allows cryptocurrency purchases via credit card — noted that most banks take “precautions to assess affordability” on some kinds of purchases. Given bitcoin’s recent dramatic price drop from $20,000 to today’s low of around $7,300, it’s not surprising that big banks are looking to reduce their exposure.
Another factor may also be in play: The crashing U.S. stock market. Signs of serious trouble in the market began to appear late last week, and the big banks may be increasingly worried about a crash in the consumer credit market. Those fears appear to have been well-founded, with the Dow Jones Index plummeting 1,175 points in today’s trading, one of the largest drops in history. Today’s crash appears to be strongly linked with growing inflation fears, another bad sign for consumer credit. Given that bitcoin is a highly volatile asset — and is still seen by many banking experts as a bubble — it makes a degree of sense to halt all credit purchases of bitcoin.