Lloyds the Latest Bank to Ban Bitcoin Credit Card Purchases
The Lloyds Banking Group, Britain’s biggest mortgage lender, announced yesterday that it was taking measures to prevent any of its customers from making cryptocurrency purchases on their credit cards. The move follows similar developments in the US banking system last week.
A spokesperson for Lloyds said that the ban would be applied throughout the group’s business: “across Lloyds Bank, Bank of Scotland, Halifax and MBNA, we do not accept credit card transactions involving the purchase of cryptocurrencies,” they said.
From today Lloyds will attempt to block any cryptocurrency purchases. They have a blacklist of cryptocurrency companies, for example exchanges, and will no longer allow payments to those businesses. Debit card purchases will be unaffected. The bank does not mind what you do with your own money, but they do mind what you do with theirs.
The banning of cryptocurrency purchases is widely seen as a way to stop people from running up large losses on credit cards, losses for which the credit card issuer then becomes liable. However, this is not the whole story. Most credit card issuers do not prevent their customers from using those cards to fund online gambling accounts, so the issue cannot simply be explained by credit card companies wanting to avoid losses.
Cryptocurrency purchases bring in new problems which credit card issuers would rather avoid. Stolen credit cards (or stolen credit card numbers) can be used to run up large cryptocurrency purchases. By turning a credit card balance into a hard to trace cryptocurrency like Monero, the thief has essentially laundered the credit on the stolen card.
This transformation of credit to cryptocurrency creates problems for credit card issuers, even when it is legitimately done by the card-holder. Financial regulators demand that banks monitor transactions for evidence of money laundering. This is much harder to do when the purchases are for digital currency.
The Lloyds group announcement follows similar measures from American banks last week. JPMorgan, Bank of America and Citigroup have all said that they are stopping the purchase of cryptocurrencies on their credit cards as they did not want to bear the associated risk.
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