Three of the United States’ largest banks have deprived their credit-card customers of the ability to purchase Bitcoin and other cryptocurrencies, deeming the risk too substantial to take on board.
Such a high degree of risk is attributed to the unnerving level of price volatility that occurs on the cryptocurrency market. No better has this been exemplified than over this past week, which saw Bitcoin dip below $8,000 (USD) for the first time since November. So big was the drop that it denoted a price performance not seen since the infamous April 2013 collapse – which included Bitcoin’s value diving by 71 percent overnight.
Indeed, news begun to circulate over the weekend that Citigroup (via Bloomberg) had joined JP Morgan Chase and Bank of America (via CNBC) in banning cryptocurrency purchases made with their issued credit cards.
The conservative move from JP Morgan is barely surprising, for it aligns with the bleak viewpoint of company CEO, Jamie Dimon. The chief executive of the financial juggernaut has long been an outspoken sceptic of the cryptocurrency movement. No better was this epitomised than at a conference held last September, where he made headlines after his dramatic comment that Bitcoin was “a fraud.” He went on to apologise last month, but insisted that his disinterest in the entire space remained.
These most recent bannings come after TD Bank did the same in October last year. Another major US bank holding company, Capital One Financial Corp., also took to prohibiting the purchase of cryptocurrencies using credit cards just last month.
These recent decisions have all come years after prominent American credit card issuer, Discover Financial Services, decided to effectively ban any purchase of digital currencies back in 2015.
Funding investments with credit cards is a practice rarely seen in traditional markets. Retail investors tend to invest in blue-chip stocks and bonds with the intention of holding for years, if not decades. These investments are funded almost exclusively by disposable income, with credit-enabled investing seen as financially reckless.
It therefore comes as concerning that a December LendEDU survey found that over 18 percent of participants funded their Bitcoin purchases with a credit card. Of those, almost a quarter admitted to not having paid off their subsequent credit-card balance.
Whilst restricting market accessibility in the short term, these recent bans can arguably be seen as conducive to a future society that is congruent with cryptocurrency.
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