Banks Join the Crypto Crackdown Bandwagon; Cardholders Now Being Affected
Parade of banks banning customers from using their credit cards to buy Bitcoin has two-fold purpose.
Bitcoin traders and investors are starting this week off hearing about a slew of news that may make them question why in the world they got into the crypto space. However, this may be just the time to remember that patience is a virtue.
In addition to seeing that Bitcoin’s price had fallen below the $7,500 bottom a Bitcoin guru predicted last week, crypto players are also seeing several banks say they will no longer allow them to buy cryptos with their bank-issued credit cards.
The reason relates to the extreme volatility, and value losses of cryptos.
Consider this. At the time of writing, 10 a.m. New York time, Bitcoin’s price was about $7,300. Since Sunday, it had wiped out roughly $6 billion of its value. Last Thursday through Friday, it loss $125 billion of its value.
Banks saying “no more”
The parade of large banks saying they will no longer allow their customers to buy Bitcoin , or any other crypto, with their credit cards began at the end of January. The trend seemed to start in the U.S., and has now spread to the UK.
The first banks in the U.S. to say “no more” to their customers were Bank of America, JP Morgan Chase, Capital One, and Citigroup. Through Monday, UK banks that had announced they were joining the ban bandwagon were Lloyds Banking Group, which runs Halifax, Bank of Scotland, and MBNA.
The Guardian reports that Lloyds Banking Group is thought to be the first UK banking chain to block its members from investing in Bitcoin.
The banks have indicated they will review their policies as time goes on.
Protecting customers from themselves
In banning customers from using their credit cards to buy Bitcoin and other cryptocurrencies, a logic from banks is they are protecting them. The concern is that cardholders will increasingly use their cards to get in on the crypto craze, and given the volatility of cryptos, loading up credit cards with crypto buys would spell disaster for many.
We told you about how there was a surge last November in the number of people doing searches for “how to buy Bitcoin with credit cards.” So there has definitely been an uptick in the number of people who think that putting crypto buys on their credit cards is worth it.
That may have been the case last year (December) when Bitcoin came close to $20,000. But, now that the crypto has fallen by nearly $13,000, many cardholders are likely finding that buying Bitcoin with their credit cards wasn’t a solid financial move.
While banks may say they are concerned about cardholders, their top and bottom lines are also of concern. They don’t want to be stuck with the card losses that could result from cardholders who don't pay their bills when the price of Bitcoin falls below what they paid to buy it with their cards.
Point to remember
While the crypto space is reeling from these price falls, industry experts have continued to point out how quickly cryptos can rebound.
Last week, Ran Neu-Ner, host of CNBC Africa’s Crypto Trader, said he saw Bitcoin falling to around $7,500 before beginning its climb higher again. He see it climbing back to $20,000 again.
About the price movements, Neu-Ner noted that Bitcoin’s price can move down as much as 50% at a time. However, he said it’s quite a resilient currency, commodity asset that just keeps going up afterwards.