Lloyds to ban Bitcoin credit card purchases over debt fears

● Virgin Money follows suit as banks urge caution on buying cryptocurrencies

Scottish banking group Lloyds has become the first UK institution to ban customers from buying cryptocurrency such as Bitcoins using credit cards.

The Edinburgh-based firm said credit card holders at its Bank of Scotland, Halifax, Lloyds and MBNA brands would not be able to buy virtual currencies from this week. Virgin Money also announced yesterday that its customers will no longer be able to use their credit cards to purchase cryptocurrencies.

The move follows similar recent decisions by American banks including Citigroup, JP Morgan and Bank of America, amid concerns over the rapid fall and rise in the value of currencies such as Bitcoins.

Banks in South Korea, China, Russia and India have also banned credit card purchases. Financial companies fear that customers could get deep into debt if customers have borrowed to invest and the value of the currency slips further.

It is believed that debit card purchases are not affected.

Bitcoin – the first cryptocurrency to launch, in 2009 – is a decentralised digital currency that enables fast, low-cost payments to anyone anywhere in the world. The value of Bitcoin reached the $20,000 mark in

0 A customer at La Maison du Bitcoin in Paris, Europe’s first bitcoin centre, which opened in 2014 December, but slumped to below $8,000 in January.

A spokeswoman for Lloyds Banking Group said: “Across Lloyds Bank, Bank of Scotland, Halifax and MBNA, we do not accept credit card transactions involving the purchase of cryptocurrencies.”

A report released last month by consumer group Lendedu found that 18 per cent of investors buy Bitcoin with borrowed money and around a third use debit cards to do so. Meanwhile, more than 70 per cent of the respondents who used credit cards and interest-bearing loans said they believed owning Bitcoin was “worth the interest expense”.

Critics of the currency say it can be used for clandestine transactions of illegal goods. Facebook banned adverts for cryptocurrencies on its sites after criticism from users about scams and hoaxes being promoted in their newsfeed.

Prime Minister Theresa May recently said there should be closer scrutiny of the volatile money markets. Germany’s Bundesbank has also called for global regulation of Bitcoin, and France’s finance minister wants tougher rules for cryptocurrencies.

Speaking at Davos, Mrs May said: “Cryptocurrencies like Bitcoin, we should be looking at these very seriously, precisely because of the way that they can be used, particularly by criminals.”

Research by the University of Cambridge last year estimated that there are 2.9 to 5.8 million unique users worldwide who are using a cryptocurrency wallet, most of them using Bitcoin. An increasing number of online retailers, including travel site Expedia, have recently started accepting Bitcoin for some payments.

A spokesman for Royal Bank of Scotland said: “We … do currently accept credit card transactions for cryptocurrencies.”