Banks, by their very nature, are risk averse. This isn’t a surprising statement. They are especially wary of credit card debt in all of its forms. This is the driving force behind many big banks refusing to back cryptocurrency purchases with credit cards. It may be a drag, but they are sticking to their guns for now and can’t really be blamed for the crackdown.
Crypto Credit Card Purchases Cut Across the Board
Bank of America, JP Morgan Chase, and Citibank are three of the many institutions that are blocking credit card crypto purchases. Capital One and Discover have similarly cut crypto purchases via their cards. Despite the effect this will have on some traders, it’s a move that makes sense. It also won’t negatively affect cryptocurrencies in the long run, as there are still plenty of ways to purchase coins with fiat currency.
Volatility Makes Market Unappealing to Banking Institutions
This move was made because money spent via credit card purchases is basically still the bank’s money. What happens when you use a credit card is that you basically borrow money with an agreement to pay it back at a later date. The volatility of the cryptocurrency markets as they currently are means that crypto isn’t a particularly safe investment. This makes banks wary and it’s all based around hedging their bets in order to limit their own risk.
All About The Bottom Line
These institutions want their debts to be paid off when all’s said and done. The interest paid on credit card balances benefits the banks, but only if the debtor can pay up. This affects crypto purchases because banks can’t collect from those who can’t afford to pay. The banks know that cryptocurrency purchases can be troublesome and simply aren’t willing to take that kind of risk.
Cryptocurrency Loans Are Risky For Banks
This is similar to banks being unwilling to loan money to any other clients they view as being ‘at risk’. Cryptocurrency transactions definitely fit in this category from an institutional standpoint. They are, in short, risky investments. Another reason why crypto purchases are on the chopping block is their more privacy-oriented nature. Banks just can’t keep track of them the same way they can track fiat purchases. This puts them on edge as well.
Added Fees and Altered Policies
Some banks have even stated that they’re now treating crypto purchases like cash advances. This lets them charge more in fees, thus protecting them if they end up losing out in the long run. Higher rates means somewhat less risk for them in the long run.
Cryptocurrency Purchases Still Allowed
Wire transfers and debit card purchases, however, are made with your own fiat currency. There are no debts involved for the bank and, therefore, the banks face no risk. That is why they will still allow these purchases. Sometimes even these do get flagged and blocked, but a call to your bank will usually do the trick.
Banks Unlikely To Change Their Stance
Despite these institutions claiming that they’re protecting their customers from potential fraud and loss of their investment, they’re really just looking out for themselves. The move towards cryptocurrencies can end up making life difficult for the banks in the long run and they have no reason to make crypto purchases easy. This is especially so if they stand to lose, which is very much a possibility in the world of crypto.