Banks may follow move by Lloyds after sharp fall in value of bitcoin
British banks are debating whether to ban their customers from buying cryptocurrencies using their credit cards after Lloyds Banking Group and Virgin Money said they had imposed such a ban. The moves by Lloyds to block their credit card customers from spending money at cryptocurrency exchanges comes after the value of bitcoin more than halved in the past month to below $8,000 and follows similar bans imposed by US lenders.
Lloyds said its decision was designed to protect customers from going into debt to invest in a highly volatile asset that could leave them facing heavy losses and unable to pay their debts. The ban was first introduced in December for cardholders at MBNA, which Lloyds acquired from Bank of America last year.
Lloyds extended the restriction to its other credit card customers on Monday, saying: "Across Lloyds Bank, Bank of Scotland, Halifax and MBNA, we do not accept credit card transactions involving the purchase of cryptocurrencies." A spokesman for the bank said it had only seen "a very small number of customers" buying cryptocurrencies on their credit cards and such transactions had "not particularly" increased recently. Lloyds customers will still be able to buy cryptocurrencies using their debit cards.
Virgin Money on Monday said: "Following a review of our policy we can confirm that customers will no longer be able to use their Virgin Money credit card to purchase cryptocurrencies. This only applies to our credit cards and not our debit card." Barclays, the UK's leading credit card issuer through its Barclaycard business, said it was "keeping this matter under close review" after holding a meeting to discuss whether to follow the lead of Lloyds on Monday.
"At present UK customers can use both their Barclays debit card and Barclaycard credit card to purchase cryptocurrency legitimately," it said. "We take precautions to assess affordability before extending credit, flag and prevent any suspicious transactions and also closely monitor credit risk." Last week MasterCard said that crossborder volumes on its network were up 22 per cent, driven in part by customers using their credit cards to buy cryptocurrencies. But it said the trend had slowed after the price of bitcoin and other digital currencies started to drop. Banks can block credit card customers from spending money at
certain merchants by instructing the credit card networks, such as Visa and MasterCard, to bar payments to certain merchant numbers.
However, one banker said it was unclear whether there was a big difference between buying cryptocurrencies and online gambling or spread betting in terms of the risks for customers. "It's also a case of the horse has already bolted as bitcoin has already halved," he said. Most UK banks refuse to touch cryptocurrencies, which raise anti-
money laundering concerns because of their anonymity. UK lenders, for instance, have declined to provide mortgages to people who have funded their purchase deposit by selling cryptocurrencies, which means their money cannot be traced.
British banks are also shunning companies that handle cryptocurrencies by refusing to let them open bank accounts or closing their accounts, which has forced many of them to open accounts in Gibraltar, Poland and
Bulgaria. Royal Bank of Scotland said: "We constantly review transactions but do currently accept credit card transactions for cryptocurrencies." HSBC declined to comment on whether it was making a similar move to Lloyds and Virgin Money. Lloyds said in a separate statement on Monday that it was cutting 930 jobs as part of the threeyear strategic plan to be presented by chief executive António Horta-Osório later this month, which includes plans to hire an extra 465 people.