Lloyds joins international banks to ban bitcoin purchases on credit card

Britain’s biggest bank, Lloyds Banking Group, will ban its 9 million credit card account holders from buying bitcoin amid concerns over the digital currency after it lost more than 50 per cent of its value in only two months.

The Daily Telegraph reports that customers of Lloyds and its subsidiaries, which include Halifax, Bank of Scotland and MBNA, will be blocked from buying the cryptocurrency.

The newspaper says that hundreds of thousands of British people have possibly invested in bitcoin amid the feverish coverage of its rise during the latter months of 2017.

However, the value of bitcoin has fallen from £14,000 (Dh72,500) in December to less than £6,000 now and Lloyds fears the bank could take a large hit if transactions for units of the currency bought on their cards are not settled, leaving the group with a large debt.

Lloyds joins a growing number of international banks who are wary of bitcoin and other cryptocurrencies. JP Morgan Chase, Bank of America Merrill Lynch and Citigroup have all said they are halting purchases of bitcoin and other cryptocurrencies on their credit cards.

JP Morgan enacted a ban on Saturday, saying it did not want the credit risk associated with the transactions, company spokeswoman Mary Jane Rogers said.

Bank of America started declining credit card transactions with known crypto exchanges on Friday. The policy applies to all personal and business credit cards, according to a memo. It does not affect debit cards, said company spokeswoman Betty Riess.

Citigroup said on Friday that it too will halt purchases of cryptocurrencies on its credit cards. “We will continue to review our policy as this market evolves,” company spokeswoman Jennifer Bombardier said.

Allowing purchases of cryptocurrencies can create big headaches for lenders, which can be left on the hook if a borrower bets wrong and cannot repay. There is also the risk that thieves will abuse cards that were purloined or based on stolen identities, turning them into crypto hoards.

Banks also are required by regulators to monitor customer transactions for signs of money laundering – which is not as easy once dollars are converted into digital coins.

The drop in the currency’s value occurred amid escalating regulatory threats around the world, fear of price manipulation and Facebook’s ban on ads for cryptocurrencies and initial coin offerings.