A new rule from biggest US banks Citigroup, Bank of America, J.P. Morgan, and Capital One disallows card holders to purchase cryptocurrency with their credit cards. Together with Discover, which introduced a similar ban earlier, this means the top five US credit card issuers have blocked credit card crypto purchases.
Bank’s spokespersons explain that the move was because of the “volatility and risk involved.”
They believe the recent hyped-up interest surrounding cryptocurrency motivated many retail investors to use credit cards to buy cryptocurrency, in fact more of it than they could afford. Now, with Bitcoin down 50% from last December, many of those investors are likely low on cash right now and may not be able to pay off their purchases soon, if ever.
Some credit should be given to banking giants, as they do differentiate cryptocurrencies from blockchain. While Bitcoin is a “fraud,” blockchain is something “real,” as J.P. Morgan’s CEO put it.
The ban came just days after Facebook “unfriended” cryptocurrency when, on January 30, it announced it would not allow ads promoting crypto products on its platform. That’s also because of the similar security concerns, as some of the companies behind those ads are “not currently operating in good faith,” as Facebook’s product management director explained.
The January’s large-scale Coincheck scam in Japan when roughly $500 mln was stolen by hackers has probably also prompted US financiers into action.
Many frown at it, but the recent ban is a rational approach to ensuring some safety from a highly volatile market. This move may be simply a temporary ban until a less turbulent crypto market will have emerged and both credit card holders and bankers have more certainty in assessing the risks.
Clearer cryptocurrency regulations, whether from governments or banking institutions, will likely help mitigate the dangers of the present hype and prevent future scams.
In 2018, however, those will keep threatening the promise of cryptocurrency and blockchain technology, which are still in their very early days.
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