Credit card customers of Lloyds Banking Group and Virgin Money will be unable to buy cryptocurrencies under new rules.
According to the The Telegraph, from today, nine million credit card customers of Lloyds Banking Group, which includes Bank of Scotland, Halifax, Lloyds Bank, and MBNA, will be blocked from purchasing cryptocurrencies such as Bitcoin, Litecoin and Ether.
This ban will reportedly be enacted through the use of a ‘blacklist’ to flag up sellers of cryptocurrency.
This marks the first major banking institution to ban the purchase of cryptocurrencies, and it is thought more will follow suit in due course, according to The Telegraph.
A Lloyds Banking Group spokesperson told the newspaper that the decision was made to “protect customers” from unaffordable losses, but that they would still be able to buy cryptocurrencies using their debit cards.
The move follows the value of Bitcoin plummeting from highs of $19,343 on 16 December 2017, to $7,806 at the time of writing; an extraordinary reversal in value.
A Lloyds Banking Group spokesperson’s only comment to Moneywise at this time is: “Across Lloyds Bank, Bank of Scotland, Halifax and MBNA, we do not accept credit card transactions involving the purchase of cryptocurrencies.” Moneywise will update the story if new information is made available.
UPDATE 6 February 2018: Virgin Money joins credit card provider ban on cryptocurrency
Virgin Money has announced it will also now ban the purchase of cryptocurrency with credit cards amid concerns over customers going into debt to purchase highly volatile digital currencies.
A spokesperson for Virgin Money tells Moneywise: “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 crypto-currencies.
“This only applies to our credit cards and not our debit card.”
However, similarly to Lloyds, there is little detail from the provider as to how this new policy will be enacted.
David Coker, lecturer in accounting, finance and governance at Westminster Business School and former vice president of global risk management at Deutsche Bank, believes that despite sharp drops in price and growing hostility from banks and regulators, the bitcoin market is maturing: “Cryptocurrency naysayers have been given great energy of late on account of the recent price corrections and the decision of a number of banks and financial institutions, including Lloyds Bank and Virgin Money, to ban credit card customers from charging bitcoin purchases.
“In truth these events are nothing more than a further sign that the Bitcoin market, and cryptocurrencies in general, are maturing; in other words, business as usual and much ado about nothing.
“In regards to the decision of Lloyds Bank, the key point is that cryptocurrencies such as Bitcoin represent a new asset class, and exhibit characteristics of both commodities and currencies. Viewed from this perspective, prohibiting credit card customers from charging their purchases of Bitcoin makes good sense and is a sign that the market is adapting to the peculiarities of cryptocurrencies, without the need for top down regulation.”
To understand more about how cryptocurrencies work, read the Moneywise guide to cryptocurrency.