The Real Reason Why Credit Card Companies Are Banning Bitcoin Purchases
Major banks around the world have started banning purchases of Bitcoin and other cryptocurrencies on credit including banks in the United States, United Kingdom, Australia, Canada and Europe. There have been a number of reasons behind the ban with most banks opting that they are trying to protect their customers from a risky unregulated market. Massive returns on cryptocurrency markets in 2017 saw so much growth that major exchanges had to block users making accounts due to not being able to keep up with demand.
But do banks really care that much about people getting into debt on their credit cards? Probably not. There are plenty of over spenders such as heavy gamblers with multiple maxed out credit cards and large debts to their respective banks. There isn’t any large push to ban sports gambling companies or casinos, despite global gambling losses totalling an estimated 400 Billion last year.
The truth is credit cards are the most fraud prone payment method on the planet with mass scale fraud a continually growing problem and credit card issuers don’t want to address it. In 2017, 78% percent of all reported online fraud involved credit card numbers.
Industry insiders have reported huge spikes in cryptocurrency related fraud cases. Cryptocurrency services are a target for fraudsters due to their largely untraceable nature.
Some banks have simply opted to count cryptocurrency transactions as a cash advance rather than the purchase of a good or service. This allows them to recoup more fees and revenue eaten by the high administration costs of disputed transactions from crypto related services. Others have opted to continue allowing cash deposits and debit card transactions due them being far less risky than the depths of credit card limits and debt.
Bottom line is the credit card is an old and insecure technology which is struggling to protect its millions of users against fraud. Banks solve this problem by charging back merchants as soon as a dispute arises which is a costly exercise for both parties. Banks have blocked cryptocurrency purchases not because they care about their customers getting into debt the real reason is because it creates too much opportunity for fraud. Hopefully the future will see levels of encryption better than a 16 digit number for the foundation of our global payments system.
Is ban actually a problem for the crypto ecosystem? Definitely not.
Until the necessary safeguards and standard practices are built to protect vulnerable investors from scams and malpractice- not allowing the purchase of highly speculative tokens or currencies on credit is entirely a good thing.
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