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Lloyds Bank bans Bitcoin purchases on its credit cards


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Lloyds Bank bans Bitcoin purchases on its credit cards

Bitcoin

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Lloyds Banking Group has banned its customers from buying Bitcoin and other crypto-currencies on their credit cards.

The ban, starting on Monday, applies to Lloyds Bank, Bank of Scotland, Halifax and MBNA customers.

It will not apply to debit cards, only to the banking group’s eight million credit card customers.

The move follows a sharp fall in the value of digital currencies, prompting fears about people running up debts.

Over the weekend, several of the biggest issuers of credit cards in the US also banned customers from using their cards to buy digital currency.

The list of financial firms included Bank of America, Citigroup, JP Morgan, Capital One and Discover.

Lloyds is concerned it could end up footing the bill for unpaid debts should the price continue to fall.

The bank said there would not be a digital or postal mailshot to inform customers about the change to its credit card policy. Customers will only be informed should they query a blocked crypto-currency credit card transaction.

Explaining the ban, a Lloyds spokeswoman said: “We continually review our products and procedures and this is part of that.”

The BBC asked other major banks about following Lloyds’ move, but none had so far responded. The banking trade organisation UK Finance said it had not released any guidance on the matter.

Gillian Guy, the chief executive of Citizens Advice, welcomed the announcement by Lloyds, saying it “shows they recognise the risks of credit card customers running up debt they can’t afford,” she said.

Bitcoin down

Bitcoin ended last week down 30% at $8,291.87 – its worst week since April 2013 and far below the $19,000 it reached last November.

However, the crypto-currency is still ahead of the $1,000 it was trading at this time last year.

Police have warned that digital currencies remain popular among criminals as they can use them to evade traditional money laundering checks and other regulations.

Recent reports from Chinese state media indicate that the Chinese government is seeking to tighten legislation to prevent investors in the country from accessing overseas exchanges to trade in crypto-currencies.

Prime Minister Theresa May recently said that action against digital currencies may be required “precisely because of the way they are used, particularly by criminals”.

She told Bloomberg: “In areas like crypto-currencies, like Bitcoin, we should be looking at these very seriously.”

The Treasury said that it intends to update regulation to bring virtual currency platforms into anti-money laundering and counter-terrorist financing regulation.

Facebook recently announced it would block any advertising that promotes crypto-currency products and services.


Analysis: Brian Milligan, personal finance reporter

Lloyds’ decision to stop the use of credit cards to buy Bitcoin appears to set a new precedent in banking.

Up to now, there have been only two things you can’t use a credit card for: paying off debt – eg making a mortgage payment – or anything illegal.

Most stockbrokers will not allow you to use a credit card to buy shares, but that is their decision, not the bank’s.

Nevertheless you can use a credit card to gamble – although that will be treated as a cash loan, with interest charges of up to 30% a year, and additional fees on top.

But Lloyds has decided that Bitcoin represents a far bigger risk than gambling.

After all, it’s their money, not yours.


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