Lloyds Bank in Bitcoin crackdown
Lender stops customers buying cryptocurrency on credit cards, as it fears having to bail out losses
BRITAIN’S biggest bank today becomes the first to ban customers from using credit cards to buy Bitcoin, amid fears they could run up huge losses.
Lloyds Banking Group will tell its nine million credit card customers that it will block attempts to buy Bitcoin, after the digital currency lost more than half its value in just two months.
The price of Bitcoin has fallen by 57 per cent from £14,000 in December to less than £6,000 last night and the bank fears it could end up footing the bill for unpaid debts should the price fall further.
It is believed that hundreds of thousands of British people invested in the cryptocurrency last year amid its extraordinary 13-fold increase in value.
But from today credit card customers of Lloyds, which includes Halifax, Bank of Scotland and MBNA, will be prevented from buying the cryptocurrency online, via a blacklist which will flag up sellers. While Lloyds is the first bank to take action, it is thought that others will follow suit.
The bank fears customers are buying Bitcoin on credit cards in the hope that they will make a profit when the value goes up, but overlook the fact they will be laden with debt when the price falls.
Concerns also continue to grow that Bitcoin and other cryptocurrencies are being used by criminals for drug dealing and money laundering.
Lloyds’ decision followed the lead of several big US banks that last week banned credit card payments on Bitcoin, as its price tumbled to a threemonth low. J P Morgan, Bank of America and Citigroup said they too would block attempts to buy digital currencies.
A spokesman for Lloyds last night said the decision was made to “protect customers” from making unaffordable losses on Bitcoin but that people would still be able to buy digital currencies with debit cards. It is understood to be a pre-emptive move to avoid heavy losses in future as interest in Bitcoin peaks.
Lloyds is the UK’S biggest banking group with around 30million customers, and has a quarter of the market for credit cards.
It is the first major credit card provider in the UK to block access to Bitcoin. Gavin Brown, a finance lecturer at Manchester Metropolitan University, said: “For some people, the only way to finance this level of speculation is through credit, with people just doing it to make a gain.” Bitcoin, which was created in 2009 and is not governed by any central authority, has long been viewed with scepticism by banks and financial regulators.
The currency exists only online and accounts are anonymous, leading to fears that it is exploited by cyber-criminals. It has been the currency of choice of online black markets and malware creators who demand ransoms.
However, many amateur investors piled into the currency a year ago when its price began to rise rapidly. It drew comparisons to the gold rushes, leading to fears that the bubble would burst. At the start of 2017 Bitcoin was worth £700 but its rapid rise turned
early investors into overnight millionaires. Bitcoin’s price has collapsed this year as multiple governments, particularly in Asia, have announced greater scrutiny.
More than £150bn was knocked off the entire cryptocurrency market last week alone as the Indian government warned it would “take measures to eliminate” its use as a means of payment. Facebook also announced that it would ban adverts featuring Bitcoin and other digital currencies, saying there had been a flurry of scams recently.
Earlier this year Theresa May issued a warning, saying: “Cryptocurrencies like Bitcoin, we should be looking at these very seriously, precisely because of the way that they can be used, particularly by criminals.”