Lloyds Banking Group bans customers from buying virtual currencies on credit cards

Lloyds Banking Group bans customers from buying virtual currencies on credit cards

Lloyds Banking Group has banned customers from buying bitcoin on credit cards, afraid that wild gyrations in cryptocurrency prices could leave it footing the bill for unpaid debts.

The banking group has told its nine million cardholding customers at Lloyds, Bank of Scotland, Halifax and MBNA that it will not recognise virtual currency transactions on its credit cards with effect from today.

A sharp acceleration in the price of bitcoin and other virtual currencies such as ether and XRP in the run-up to Christmas provoked an explosion of interest in the market among ordinary savers suffering from years of low interest rates.

However, a 57% crash in value during New Year's trading has caught many novice investors flat-footed and nursing huge losses.

Bitcoin ended last week down 30% at $8,291.87 - way below the $19,000 it reached last November.

The crackdown comes as law enforcement agencies and regulators promise to tighten anti-money laundering rules to counter the use of anonymous virtual currencies by criminals who are looking to evade detection by the authorities.

Lloyds is currently the first of the UK's main banks to disbar bitcoin transactions on its cards, although several US banks, including JPMorgan Chase, Bank of America, Capital One, Discover, and CitiGroup have instituted similar cryptocurrency bans in recent months.

Comments: (5)

Paul Love
Paul Love - Konsentus - Nottingham 05 February, 2018, 10:581 like 1 like

Interesting risk assessment - but surey they should be treating thus as quasi cash, in the same way as buying foreign currency and making a good return from the 3% cash advance fee they charge on their credit cards.

Christopher Williams
Christopher Williams - RTpay - Winchester Uk 05 February, 2018, 11:571 like 1 like

I agree with Paul's point; I think the only reason for not treating this as a  cash advance is that it suggests it is a currency, something being resisted by the authorities.

The other factor explaining a number of the banks' attack on cryptocurrencies is an attempt to link blockchain transactions as connected to the problem. The much lower costs of blockchain, particularly for international trades, is something banks wish to discourage, at least until they a get chance to catch up on the technology - which will probably take around five years in most cases. 

Back to Lloyds; the ban is solely (for now) on credit card transactions, not on debit cards, just to be clear on that.  

Michael Fuller
Michael Fuller - None - London 05 February, 2018, 16:32Be the first to give this comment the thumbs up 0 likes

So Lloyds are saying that if customers spend to their credit limit to buy something (Crypto currency) they may not be able to afford to repay. Doesn't this suggest that they have set the credit limits wrong and that these all need to be reduced? They're not suggesting that crypto currencies are illegal or immoral (more usually used as reasons to prevent transactions) so it seems to me that they have their credit assesments wrong.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 06 February, 2018, 14:581 like 1 like

I don't think it's because of "afford to repay". One of the American banks has said BTC investments are heavily under water, so people may not be "willing to repay".

Mark Ball
Mark Ball - MAB Holdings - Toronto, Ontario 16 February, 2018, 12:28Be the first to give this comment the thumbs up 0 likes my sense is that settlement risk is also an issue given The extended timeline to complete a crypto transaction. A profile of cardholders purchasing crypto on their cards may reveal lower credit scores. Has Lloyd’s done this in the past for other high risk currencies?