Some of the world’s largest banks announced on Friday that customers are now prohibited from buying cryptocurrencies with credit cards, citing market volatility.
Per CNBC, J.P. Morgan Chase, Bank of America, and Citigroup all announced the new restrictions as the price of Bitcoin plummeted to below $8,000 on Friday, less than half of the high of over $19,000 it hit in mid-December.
“At this time, we are not processing cryptocurrency purchases using credit cards, due to the volatility and risk involved,” a Chase spokesperson told CNBC. “We will review the issue as the market evolves.”
Capital One banned credit card purchases of cryptocurrencies last month, and Discover has had a ban in effect since 2015. Per Bloomberg, the bans are designed to prevent customers from making hugely risky purchases on their credit lines or scammers from buying cryptocurrency and disappearing:
Allowing purchases of cryptocurrencies can create big headaches for lenders, which can be left on the hook if a borrower bets wrong and can’t repay. There’s also the risk that thieves will abuse cards that were purloined or based on stolen identities, turning them into crypto hoards. Banks also are required by regulators to monitor customer transactions for signs of money laundering — which isn’t as easy once dollars are converted into digital coins.
As Bloomberg noted, the ban doesn’t necessarily affect debit cards.
Bitcoin’s free-fall from $20,000 shows no signs of slowing down, and the conventional wisdom that the currency was not likely to dip back below $10,000 hasn’t held up. Bitcoin alone has lost nearly $200 billion, while virtually all of the major cryptocurrencies are also seeing major losses recently.
Numerous countries are moving to either regulate or ban cryptocurrency, including India and China. Even in the U.S., which has taken a more laissez-faire approach towards crypto, the Internal Revenue Service has begun collecting customer records from major exchanges in a bid to hunt down tax evaders.
On the commercial side, some financial tech companies like Jack Dorsey’s Square or trading app Robinhood have made it easier to buy Bitcoin or other tokens like Ethereum, CNBC noted. But Facebook recently banned all cryptocurrency ads for frequently being associated with financial grifts, and numerous high-profile scams have scared many newcomers away from the space.