Some banks are making a tough stance against Bitcoins, and they are taking all efforts to ensure their customers do not buy Bitcoins using credit cards. Their customers can invest in cryptocurrency at their own risk, but with their own money. While there is a long list of exchanges and places where you can buy Bitcoin with a credit card, certain major banks have acknowledged the lawless nature of cryptocurrency in the US and the UK.
In an attempt to safeguard their money and their reputations from such a volatile and crime-prone market, institutions like JP Morgan & Chase, Lloyds, and Virgin Money have enforced a ban on Bitcoin purchased with credit cards.
A recent decision it may seem, but they are actually following suit from establishments like Discover Financial Services, who acknowledged the hazards back in 2015, since which time credit card purchases on cryptocurrencies from them have been disallowed.
What is it all for?
These banks do, however, say the ban has first and foremost been imposed for their customers’ own protection. They consider it to be against their lending policies for the credit cards to allow account holders to run up debts they cannot afford to pay back. Situations like these are a danger in the crypto market. All it takes is for the values to take a sudden downward turn, and thousands will be left potential millions of dollars in debt as a result.
There is also the severe risk of financial crime to consider, with many criminals having successfully used Bitcoin for money laundering, embezzlement, Ponzi schemes and purchasing illegal goods like guns and drugs.
That isn’t enough to put off some banks, however. The UK’s Barclays, for example, insists they keep a close enough eye on risk and monitor suspicious transactions more than adequately.
Just how secure are credit cards?
While many will agree that the main reason for the ban is legit and makes sense to protect their customers, others argue it is in support of more self-serving motives. That is to say, credit cards are no longer such a force against fraud, especially with the unregulated nature of cryptocurrency transactions.
Hackers need only crack into a payment system, get away with the credit card information, and steal millions. It happened back in 2014 with a data protection breach at Target, where the credit card information of between 40 and 70 million users was hacked.
And then, more recently, $75,000 worth of Bitcoin were stolen via credit card in February of this year, from none other than Apple co-founder, Steve Wozniak. It may be pocket change to him, but to an everyday investor, that kind of amount could cause bankruptcy or worse.
All that’s required is the right knowledge. Take Matjaz Skorjanc, for example. The Slovenian chief technical officer for NiceHash turned virus creator who hijacked nearly 13 million computers for their usernames and credit card information.
Skorjanc’s old bosses – NiceHash – suffered what has been described as the 4th largest breach in the history of cryptocurrency, with nearly $70 million in Bitcoin getting stolen. Some call it an inside job, with Skorjanc’s background and capabilities. Or all that stolen credit card information may have been sold to the highest bidder.
The effect on the Market
So, these banks may have had the right idea in putting these bans in place. It may help in fraud protection and financial crime-fighting, but what does it do to the value of the cryptocurrencies themselves?
The plummeting value of Bitcoin and its relatives is one of the main purported reasons for this crack-down in the first place. It was reported to have fallen by well over half in the space of two months – from $19,000 in December 2017 to just over $6,000 in February 2018.
Some sources blame Virgin Money’s ban on credit card crypto purchases for this decline, while others consider the bans a sensible move, though admitting it will do little to impact the overall value.
If the impact larger-scale bans had on values, it is understandable why many high-rolling investors may be frustrated by the decision. South Korea’s temporary nationwide ban on crypto trading, for instance. Bitcoin’s value only went back up again when the Korean government changed their mind.
Incoming Crypto Regulations – Are the bans the first step
While the ban is in place to coincide with incoming regulations on cryptocurrency trading, which have been a hot topic for quite some time, some countries are not enforcing a credit card ban. Instead, they are hoping the regulations soon to be in place will be the full solution.
India is one such country. Their second-largest credit card distributor SBI has not banned their customers from using their cards for cryptocurrency purchases, instead issuing a warning regarding the risks of the market.
It may be a drive to build a bigger customer base since this announcement came just shortly after Citi India imposed a ban on their own credit cards.
How to get around the bans
Bans, like laws and rules, are often there (not necessarily by design) to be loopholed around. So how will the crypto smart alecks get around this credit card ban?
One option, as in India, is the proposal to make Bitcoin purchases overseas instead, where the bans are not in place, and the regulations remain lax. As the hold on cryptocurrency grows tighter regarding bans and regulations, just watch the overseas markets go up.
From the look of things, in the long run, some investors will be glad the decision has been made. It may take a while, but when the new stories start rolling in of bankruptcy and destitution brought about by an unpayable credit card debt, investors that are poor with managing credit cards will be glad of the decision.
However, people who love having control over their own money will continue venting their frustrations against banks. Some may move funds to other banks just to maintain their ability to use their money as they want to. Whichever the case, invest wisely. Don’t be too far out of your depth and use a trustworthy exchange.