Bitcoin: Lloyds bans credit card purchases

Banks on both sides of the Atlantic have banned the use of credit cards to buy Bitcoin, fearing their customers could get into debt as the value of the crypto-currency plunges down.

Lloyds Banking Group, Britain’s biggest lender, has followed US banking giants JP Morgan Chase and Citigroup in prohibiting the buying of virtual currencies, amid growing concern surrounding the volatility of the cryptocurrency market.

Reuters reports that, Mastercard, the world’s second biggest payments network, “said customers buying cryptocurrencies with credit cards fuelled a 1% increase in overseas transaction volumes in the fourth quarter”.

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Bitcoin, the biggest and best known virtual currency, has lost more than half its peak value of $19,187 per Bitcoin since the turn of the year. Warnings by regulators and ministers in the US, South Korea, China, Russia, India, Germany and France spooked investors.

It is believed that hundreds of thousands of Britons invested in Bitcoin last year during its extraordinary 13-fold increase, “and banks now fear they could end up footing the bill for unpaid debt should the price fall any lower”, says The Daily Telegraph.

According to the paper, credit card customers of Lloyds, Halifax, Bank of Scotland and MBNA will be blocked from buying the cryptocurrency online via a blacklist which will flag up sellers, and other banks are expected to follow suit. Customers will still be able to buy digital currencies with debit cards.

Lloyds’s decision “appears to set a new precedent in banking”, says the BBC’s personal finance reporter Brian Milligan, and effectively equates buying Bitcoin with gambling.

Speaking at the World Economic Forum in Davos last month, Theresa May said Britain needed to take a serious look at digital currencies because of the way they can be used by criminals to trade drugs and launder money, Reuters reports.

Last week, Facebook banned adverts for Bitcoin and other crypto-currencies on its sites after criticism from users about scams and hoaxes being promoted in their newsfeeds.