The recent rash of banks announcing that they would stop accepting credit card transactions for bitcoin purchases has created a stir in the altcoin sphere. “Capital One is currently declining credit card transactions to purchase cryptocurrency due to the limited mainstream acceptance and the elevated risks of fraud, loss, and volatility inherent in the cryptocurrency market,” a Capital One spokesperson told Breitbart News recently.
For years, customers have complained about banks covertly denying altcoin credit card purchases. However, the recent announcements represent the first significant industry position toward altcoins. This position leaves investors questioning why it happened the way it did, which banks still allow credit card purchasing of altcoins, and if it is even wise to buy altcoins with a credit card in the first place.
Why This Happened
To start, it should be said that many banks don’t understand bitcoin. Banks view bitcoin and altcoins as industry disruptors, a potential market anchor, or both. Some in the banking industry have openly stated their dismissal of the digital currencies.
The recent volatility in the bitcoin market, where a prolonged price correction drove down the coin price by more than 50 percent, gave the banks cover to impose new regulations on bitcoin. Bitcoin purchasing by credit card comes with added risk for financial institutions as the high volatility means that it is possible that purchases can be made that may not have enough future value to satisfy the repayment requirement.
Before the credit card shutdown, the banks have indicated that they would make it more difficult to use a credit card to make altcoin purchases. “Recently, the MCC code for digital currency purchases was changed by a number of the major credit card networks. The new code will allow banks and card issuers to charge additional ‘cash advance’ fees. These fees aren’t charged or collected by Coinbase. These additional fees will show up as a separate line item on your card statement,” Coinbase wrote in a statement.
These cash advance fees—which could be as high as 23.99 percent—represent an effort by the banks to cash in on the recent bitcoin buying spree. These are separate from the exchange’s transaction fees, which as being charged in conjunction with these fees.
The banks may have also been swayed by speculation that the U.S. Congress is considering ways to regulate bitcoin sales. All of this is complicated by the fact that many of the affected banks have indicated their support of blockchain investment products, are seeking partnerships with blockchain companies, and/or are considering starting their own altcoins to simplify cash transfers within their own organizations.
Bucking the Trend
The banks that have declared bitcoin a no-go represent 69.2 percent of the American credit card market. While this represents an overwhelming front of opposition, there are still options available for those who wish to use credit cards for altcoin purchasing.
While the major banks in the U.S., the United Kingdom, and Australia have all signed on to banning credit card purchases for altcoins, Canada’s banks have not. While there has been no statement in support of altcoins and while the banks reserve the right to revisit the issue, the largest Canadian banks have indicated that they currently do not plan to restrict credit-line purchases for altcoins, barring that the merchant networks involved accept the transaction in the first place.
Additionally, many of the smaller banks and the online-based banks are actively supporting altcoin credit card purchases. Some, like Simple Bank, are taking things a step farther and allowing comingling of exchange and wallet features.
It should be said, though, that it is advisable not to purchase altcoins—or make any other investment—with a credit card. Credit card purchases on securities usually incur a transaction fee, which effectively raises the final price of the securities. This makes it harder to get a favorable return-on-investment for said securities and, if the credit card purchase is in fact a loan for funds not currently held, makes it harder to pay off the securities. It is advisable that—if possible—a debit transaction or bank transfer is used to make altcoin purchases.
Below are our lists of banks that have explicitly said that they would accept or reject altcoin credit card purchases. The non-inclusion of a bank from this list does not mean that the bank supports or rejects credit card purchasing; it should only be read that verifiable information about that bank’s motivations could not be found at the time of article publication. The lists are accurate as of February 7, 2018; this story is developing and is subject to updates as more information becomes available.
Banks that accept bitcoin
|Fidor Bank||Germany||Fidor has noted that it will team up with Kraken to operate a fully functioning altcoin bank.|
|Change||Estonia||Change, a crowd-funded blockchain project (ICO), is seeking to make banking functions available to altcoin users. The company is doing this by offering a wallet for the storage of altcoins, providing an altcoin spending card, and offering a marketplace that will aggregate the best investment and insurance opportunities and onboarding them on a single platform.|
|Worldcore||Czech Republic||Worldcore provides multi-currency accounts that can be accessed via debit and virtual cards. The leading bank in the Czech Republic, its PayAnyCard can be loaded with altcoins to make digital currency spending a simple matter.|
|Bankera||United Kingdom||The operational arm of SpectroCoin, Bankera seeks to be a fully-functional bank that offers payment accounts, interbank foreign exchange rates, debit cards, lending—allowing altcoins as collateral—and payment processing.|
|USAA||United States||USAA allows Coinbase users to check their bitcoin balances from their apps and have invested in the exchange. This marks the first major bank to invest in an exchange.|
|Goldman Sachs||United States||Goldman Sachs has announced that it will launch an altcoin trading desk and will offer altcoin products in 2018.|
|Toronto-Dominion Bank (TDB)||Canada||Despite moves to the contrary from American banks, Canada’s largest banks are supporting altcoin credit card purchases—as long as the purchase is accepted by Mastercard, Visa, Visa debit, or Interac. This may change shortly, however.|
|Royal Bank of Canada||Canada||See TDB. “We recognize that regulatory, risk and other external environmental factors relating to cryptocurrency continues to evolve,” RBC spokesman AJ Goodman said to Bloomberg. “As such, we continue to review our policies to consider how we can best support clients.”’|
|National Bank of Canada||Canada||See TDB.|
|Simple Bank||United States||Simple Bank collaborates with most bitcoin exchanges and permits direct buy-sell transaction for bitcoin.|
Banks that explicitly ban or limit bitcoin purchasing
|Bank of America||United States||Bank-issued credit cards and lines of credit can no longer be used to buy bitcoin or any other altcoin. Depositors can still use their debit cards or bank transfers for purchases, though.|
|Chase||United States||See Bank of America|
|Citigroup||United States||See Bank of America|
|Lloyds Bank||United Kingdom||See Bank of America|
|Halifax UK||United Kingdom||See Bank of America|
|Bank of Scotland||United Kingdom||See Bank of America|
|MBNA||United Kingdom||See Bank of America|
|Wells Fargo||United States||Wells Fargo has been named a defendant in a lawsuit where it was alleged that the bank sought to block transfer wires to bitcoin exchange Bitfinex.|
|Commonwealth Bank of Australia||Australia||The Commonwealth Bank of Australia has held that it can refuse any international money transfer that is meant for facilitating payments with bitcoin or any other altcoin. However, the bank insists that lawful use of bitcoin is permitted—as long as the use complies with the bank’s terms and conditions.|
|CitiBank||United States||See Bank of America|
|Capital One||United States||See Bank of America|
|Discover||United States||See Bank of America. The inclusion of Discover means that all five of America’s largest card issuers and six of the top 10 have altcoin bans.|
|Virgin Money||United Kingdom||“Following a review of our policies, I can confirm customers will no longer be able to use their Virgin Money credit card to purchase cryptocurrencies,” a spokesman for Virgin Money told Reuters. “This only applies to our credit cards and not our debit card.”|
|Visa||European Union||Via its subsidiary Wavecrest, Visa ended the use of its payment network as the backing of European-issued prepaid altcoin cards, such as Bitwala, Tenx, Bitpay, and Xapo. Cards that convert bitcoin into fiat currencies will not be affected.|
|TD Bank||United States||Customers have reported that TD Bank has iterated that its policy is not to associate with bitcoin or to permit its subscribers to engage in said business. The bank has been accused of stopping bitcoin purchasing transactions and closing accounts suspected to be linked to bitcoin.|
|PNC Bank||United States||See TD Bank.|
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