Major U.S banks including JPMorgan Chase & Co. (NYSE:JPM) and Bank of America Corp (NYSE:BAC) have reportedly stopped allowing the use of credit cards to acquire cryptocurrency.
JPMorgan Chase is the latest bank to join the list of U.S. banks that have decided to ban the use credit cards to acquire digital currencies such as Bitcoin or Ethereum among others. The U.S bank’s spokeswoman Mary Jane Rogers made the announcement on Saturday revealing that the bank is trying to shun the credit risk that comes with cryptocurrency transactions. Bank of America made a similar move on Friday where it started blocking all the credit card transactions with cryptocurrency exchanges.
A memo released by Bank Of America revealed that the credit card ban would involve all business cards as well as personal cards. BOA’s spokeswoman Betty Riess, however, revealed that the ban would not involve debit cards meaning customers can still use their debit cards to purchase cryptocurrencies. Citigroup Inc (NYSE:C) also made a similar announcement.
“We will continue to review our policy as this market evolves,” stated Citigroup spokeswoman Jennifer Bombardier.
The argument presented for banning the use of credit cards to purchase cryptocurrencies is that lenders are left in a tough spot when borrowers lose their bets on cryptocurrency and then end up not being able to pay their loans. The use of these credit cards also exposes them to risk such as information theft such as stolen identities. The matter of money laundering has also been brought up as a reason because it is not easy to monitor fiat currencies once they are converted into cryptocurrency.
Banks are also considering cryptocurrency investments as extremely risky which goes against credit issuance strategies which aim at minimizing risk. This is on account of the volatility of cryptocurrencies. For example, Bitcoin has so far dropped by about half its value from its peak in December. The decline is on account on the various negative news associated with cryptocurrencies such as hacking, cryptocurrency bans and speculation about it being a bubble among other things.
JPMorgan Chase stock closed the latest trading session on Friday at 114.28.