Credit cards and crypto currency never really mixed well anyway. If you sell crypto currency for a credit card payment you take a huge risk because the buyer can reverse the transaction but you can't. This typically means that (for credit card payments) the markup is unreasonably high or the seller is running some kind of scam.
"If it's too good to be true, the seller is probably using it to launder stolen coins." This theory gets floated frequently in the various crypto subreddits.
I'm not very familiar with restrictions on credit card purchases - are there other high-risk purchases that are routinely blocked on credit cards?
I understand the stated reasoning, but if this is the first such restriction (again, I don't know if it is), it's a pretty remarkable deviation relative to most credit card policies, i.e. we will happily finance whatever ridiculous decisions you choose to make. I wonder if they are seeing spiking default rates?
Could you please stop posting unsubstantive comments to Hacker News? Please see this explanation, which I just posted in a similar situation: https://news.ycombinator.com/item?id=16300163.
Purchasing high volumes of gift cards or other cash equivalents will often get you shut down. Do this too much with Chase and you'll end up blacklisted.
Really? They're sold in volume for people to use in rewards and promotions programs, I'm assuming this doesn't involve showing up at the gift card mill with a chest of doubloons. How does that work?
its because of fraud. with crypto once you have the coin there is no equivalent of a chargeback. if you use a stolen credit card to buy something you have to have somewhere to ship it, therefore they can find the thief. with cryptocurrencies they just have to take a loss and open a new card. this is why credit/debit cards security model is absolute shit and should be illegal.
> if you use a stolen credit card to buy something you have to have somewhere to ship it, therefore they can find the thief. with cryptocurrencies they just have to take a loss and open a new card.
Necessarily results in:
> credit/debit cards security model is absolute shit and should be illegal.
Can you describe a comprehensive alternative that would, at least in theory, be better.
As an analogy: if I come in to your house and steal your gold bullion while you're not looking, leaving little trace of my presence, does that mean the security model of houses is absolute shit and should be illegal?
a) is illegal in most jurisdictions because of the way credit law works; the card companies can't collect on a debt to them for a product or service that wasn't delivered.
(I suppose they could eat the cost themselves, but I can't see that happening)
> other high-risk purchases that are routinely blocked on credit cards
Normally the blocking is applied to merchants, rather than visible to the customers, but yes. Ironically this kind of thing used to be cited as a reason for bitcoin adoption.
really? you can't rely on others good will, your money should be cryptographically secure and require you to send it instead of anyone with a number being able to pull your money. its like having an API with no login or password on it.
I totally agree with your previous comments on the EFF and peoples right to privacy and secure data. Shouldn't this extend to their money as well?
I'm only commenting on the context here. Your comment seemed to suggest that this decision was made due to the amount of fraud in the credit card industry. I don't think the article supports that position.
I do think this article makes some good points about the current dangers of the cryptocurrency market, especially for credit card operators.
To answer your question:
Yes, I do think people deserve privacy and security in their personal finances. I'm not convinced that cryptocurrencies provide this. My reservations come mostly from the apparent (and I believe historically obvious) instability of an unregulated financial market.
If you can't rely on others' goodwill, then for any purchases you need a solid mechanism to ensure that you can reverse the transaction if you get cheated. Credit cards provide such a system, pure cryptocurrencies ("code is law") do not - for that you need at least a cryptocurrency plus a trusted escrow system, and even that doesn't give you equivalent protection since non-escrow payments are still possible, allowing you to lose your money if hacked.
Credit cards isn't a system where "anyone with a number being able to pull your money" - merchants can ask for that money, but they're not certain to get it, you can veto that transaction, you'll get it reversed (with legal guarantees) if its fraudulent, and you can get it reversed if you were sold goods that aren't what you were promised. Not so with crypto, where once you send it to someone for whatever technical reason (including a compromised number) it's gone.
...unless you have some bitcoins already lying around. in which case you could simultaneously buy and sell at the same time, reducing your risk to almost 0.
You have 100 Bitcoins. You buy 100 Bitcoins at $1,000 each on credit. You now have $200,000 of Bitcoins and $100,000 of debt. Bitcoin crashes 60% ($19k to $7.6k is a sixty percent crash). You now have $80,000 of Bitcoins and $100,000 of debt. You are insolvent.
If you’re talking about buying and selling from yourself to milk points, that’s fraud.
I don't mean buying those on margin. I meant if you already had some lying around. maybe you mined some back in 2010, maybe you already intended to hold some long term.
>If you’re talking about buying and selling from yourself to milk points, that’s fraud.
i'm not sure how that's fraud anymore than you buying goods with your credit card and immediately selling them to rack up rewards.
Because iMuzz said "sell when it covered the fees/principal". If you sold immediately, you'd be down a little bit each time because of cash advance fees/coinbase fees. So instead, s/he was just getting lucky buying bitcoin as the price kept rising. That same plan would not have done well so far in 2018..
I don't blame them in the slightest for this. The "immutable" (for lack of a better term) nature of many cryptocurrencies means that any purchases made on credit can't be easily taken back.
And I'm pretty sure it's always been "technically not allowed" to buy another currency with credit cards (or it's technically allowed, but treated as a "cash advance")
Yes, but if the act of buying any of those on a credit card became common enough that they started seeing the problems from them, I guarantee that they would be banned as well.
They can't whitelist what you can buy with a credit card, so instead they blacklist things when they become big enough to matter.
> Didn't the SEC / IRS rule that crytocurrencies are an asset rather than a currency though? Mm
The IRS decided that that's the category they fall into for certain tax purposes. Not sure why that would have any bearing on the application of credit card issuer policies that are not tied to the particular definitions in the tax code, though.
That makes no difference to the conversation in hand.
What parent is saying that unlike other purchases with credit cards, you can't really do much about cryptocurrencies.
For instance if you purchased a physical product, in case of a problem (like fraud or something), at least you can go to the place where the delivery of the physical product happened and find it.
Similarly in case of a digital good (like ebook or pdf, since it's mostly copied from one destination to the other) if the product wasn't delivered, then it can be redelivered with no cost to the producer.
It's the first time we are encountering a digital good with non-duplicability of physical world goods with hard tracability of cash.
Is that true? If coinbase detects a chargeback due to fraud from a bitcoin purchase in your account couldn’t they just freeze your account and prevent any outbound transfer from happening?
Say this account gets hacked. Hacker purchases $1000 worth of Bitcoin or Ethereum and transfers this to a random wallet on the network. Now a chargeback leaves someone paying the bill, because the BTC or ETH can't be recovered.
The baseline for most credit cards is 120 days for the cardholder to dispute a charge in the US, or 180 days internationally. Some specific dispute categories for some credit cards have a shorter limit, and some effectively have longer limits because the starting point is some date after the transaction.
On top of that, there may be consumer protection laws in some areas that affect this. For example, in California it is one year for certain types of dispute [1].
Note that the above is how long for the cardholder to dispute the charge. Add to that however long it takes the card company to process things before the merchant sees the chargeback.
I've seen one that arrived at the merchant over a year after the transaction, although I think that is rare.
The incentive for most people to buy concert tickets is to see the concert or scalp the tickets; chargebacks that occur in this context are on an individual basis and the banks will ban customers that abuse this chargeback process. In some cases, the merchant may be at fault, perhaps selling tickets to a show that does not transpire as described and the concert-goers may issue chargebacks en masse in response, but in this case the banks identify the source of the problem was not _the individuals_ (who will probably have relatively few if any chargebacks in their account history) and will actually penalize the merchant, sometimes banning them altogether if they cannot reasonably explain the chargeback behavior or if chargebacks become a pattern for that merchant.
With blockchain tokens there is no incentive except profit, so if the blockchain token markets create a panic among buyers, it can cause mass chargebacks at _any_ time within the chargeback window, this is clearly a completely different risk model than concert tickets. At the end of the day, all that's really happening here is the credit card companies are banning transactions from merchants with high chargeback history, a totally common practice.
Your argument makes no sense and provides no evidence.
Chargebacks can be initiated at any time within the chargeback window, regardless of what is purchased.
Further, chargebacks hurt the MERCHANT. MERCHANTS are the ones banned and blacklisted (there is a blacklist file shared among all VISA issuers) for bad behavior.
IF merchants had high chargebacks, they would state that - there is no NDA preventing the card issuers from stating it.
And even if there were, there are higher-risk tiers for such merchants (like merchants that sell online porn).
How much experience do you have dealing with VISA etc. ...?
You're replying to someone else, with a passive-aggressive swipe at me, and justifying it by linking to a prior conversation between me and yourself. Take a step back and consider that you might perfectly fit the description of someone with an axe to grind.
> Chargebacks can be initiated at any time within the chargeback window, regardless of what is purchased.
Yes, but as I already explained, the incentive to chargeback is NOT the same regardless of what is purchased. Chargebacks are relatively rare because most people only chargeback if there is a dispute with the merchant, but outside of fraudsters, its not that common for people to chargeback on a product months later. Even with high risk products like porn, there are predictable chargeback rates that can be factored into the overall profitability of the product category, but with blockchain tokens a sudden shift in price (like the one we're seeing now) can cause a large and abrupt spike in chargebacks all from the same product category. Wild shifts in the price of a digital commodity is a unique quality of blockchain tokens that totally changes the chargeback risk profile.
> How much experience do you have dealing with VISA etc
How much experience do you have in the lending business? This has nothing to do with VISA, this is about banks that have to make a decision about lending money. Companies that lend money are valued in large part based on the quality of the loans on their books; when the books are loaded up with crap accounts made up of gambling debt from blockchain enthusiasts who could go bankrupt overnight, it does not inspire confidence.
You're some kind of mind-reader, and can read the minds of all 1.5 million (or whatever the number is) people who initiate chargebacks each year on their credit cards?
I have actual experience as a credit card merchant for 10+ years. You have shown yourself to have no real-world knowledge of the situation.
Why don't you actually respond to what I've written instead of trying to appeal to your own authority? I get it, you have experience as a credit card merchant, congratulations on that achievement, now use that experience to form a response to the argument... though I want to reiterate that the credit card companies have nothing to do with this, even if you just examine the headline you will see that this is a story about banks that don't want to underwrite blockchain gambling.
Makes sense to me. You can't buy many cash equivalents with credit card and can't usually get cash advances from a credit card, so this is just correctly implementing that policy. Can you buy stock with a credit card?
That works a bit better when your opponent is a failing empire that just finished fighting two World Wars and is now facing an insurrection by 400 million people in a land several weeks away by most viable transport methods.
Believe it or not, many ignored/laughed-at people, movements, etc. throughout history wound up not winning.
This is highly amusing to me. IRS rules that crypto currencies are not, in fact, currency, but commodities and treated like property for taxation purposes. A couple of banks are now saying, "we won't let you purchase said commodities with credit cards". It's an arbitrary restriction. It goes to show you just how much control large centralized banks have over our purchasing decisions...which, to me, just reinforces the need for decentralized financial technology.
A lot of folks on here are proponents of net neutrality. I think banking should be neutral, too.
Protecting people from themselves is a USA tradition. Ask the SEC. I assure you once bitcoin trading has the protections that SEC adds to stocks, JPMorgan & BofA will once again allow credit card purchases of them.
> Protecting people from themselves is a USA tradition.
Um.... they aren't protecting people from themselves. The bank is are protecting themselves from their customers -- both from fraud the bank becomes liable for and god knows what legal regulations.
BofA doesn't give a fuck about you, they are doing this to cover their own ass.
They are not blocking purchasing of these from all accounts, just credit accounts. You can still purchase via ACH and debit. What they are doing is not allowing you to use their money to buy:
>The move doesn’t affect debit cards, according to Betty Riess, a spokeswoman for the Charlotte, North Carolina-based lender.
>Allowing purchases of cryptocurrencies can create big headaches for card lenders, which can be left on the hook if a borrower bets wrong and can’t repay. There’s 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 isn’t as easy once dollars are converted into digital coins.
This isn't strictly true. These same banks have been known to close accounts that are associated with known crypto exchange transactions (coinbase, bitstamp, etc.) - to the point of most recommending you keep these transactions entirely separate and try to avoid them if possible.
I was originally interested in Bitcoin exactly due to this. Money in the bank is not your money, and that was made exceedingly clear to me on a few occasions. That they are corner cases and outliers is irrelevant to me - that's where the system breaks down and you find out exactly how powerless you really are until you're into 8 figure territory.
Basically do anything a bank determines is risky and you more or less forfeit your access to the US banking system.
Large banks actively choose winners and losers and who you can send your money to every single day. Try buying porn on-line with some credit cards for example.
I don't particularly think buying crypto with a credit card is a great idea, but it certainly highlights how much the war on cash and ever increasing centralized banking really has significantly reduced your personal freedom in just a couple decades.
Isn't buying crypto on a credit card basically leveraged speculative trading on an extremely volatile asset? Considering that many people who are buying crypto are doing it for investment purposes, it's pretty obvious why banks would frown on this. The downside risk is enormous, it distorts their credit models, and they have no way to contain damage by margin calling.
Investors loan them money with the knowledge that they do that, and banks have risk models in place to try to mitigate the risk associated with those trades.
Banks agreed to extend credit to Bob from accounting so that he could buy consumer goods, not so he could participate in leveraged trading. The average individual is utterly unprepared for that risk and doesn't understand it, and banks aren't prepare to accept that risk. If you force them to, they will be much more conservative in who they give credit to, and the average user will lose out as a result. It's far easier to ban stupidly risky behavior than build it into their credit models.
Also, if people want to do leveraged trading, there are mechanisms to do it outside of credit cards. The fact that people are using credit cards in itself suggests that they are unsophisticated and should not be doing such trades.
I agree I wonder how many people bought stuff a few weeks ago when there was an obvious massive bubble and tried to do charge backs or disputes when the price started falling and they releaized how much they lost?
Between that, payments to ransomware, whatever online drug markets exist, etc... can’t blame them at all.
People buy consumer goods knowing that they're not going to get that money back. A lot of people buy crypto because they think it can only increase in value, and so they end up spending far more than they are willing to lose when the value goes down. It's not that one purchase is "better" than another, it's that people think about the purchases differently which leads to more risky behavior when it comes to buying crypto.
Credit card issuers refuse all sorts of transactions though.
They have legitimate reason to not take on the downside risk of crytocurrencies and their card agreements make it clear enough that they can't be used for everything.
I think a better analogy is prohibiting using your credit card as a de facto margin account for buying crypto currencies.
If they were letting people purchase bitcoin on credit cards up until last Friday[, there's going to be a ton of people that racked up charges at the $15-20K price level in December that cannot pay them back. Be curious how big the damage is going to be for them.
The same way those people would pay off their cards for any other purchase. BTC's downward price has no bearing. Most CC purchases are for things like food, furniture, jewelry, clothes, electronics, etc, all items that are sunk costs; the affordability of the CC bill is a product of credit score and overall credit limit.
At the same time, we'd also be proponents of shutting down the connection of someone infected with a virus that is flooding the network with traffic. This would fall under the same thing, if the banks are running into a lot of problems with CC transactions to buy crypto.
Also, what the IRS says about cryptocurrency for tax purposes has no bearing on the discussion at hand.
When you use a credit card, you're not using your own money - you're borrowing the bank's money. It's perfectly legit for them to evaluate the risk associated with what you're using the borrowed money for.
Well. Surely, this is what cryptocurrencies are for: to route around the evil monopoly banks. One assumes the way that cryptocurrency exchanges handle this will reveal once and for all the true utility of cryptocurrency in the modern economy.
I appreciate the many wonderful story submissions you've made to Hacker News over the years, but if you continue to break the rules in comments here, we're going to end up banning you. It wouldn't be fair to other users otherwise. So could you please (re-)read https://news.ycombinator.com/newsguidelines.html and post civilly and substantively, or not at all, from now on? Just like every HN user needs to.
I think they know some will make 15-20% on their transaction thus being able to pay off debt faster. If they ban crypto tranactions, they keep things as is. Why do they care where you spend your money? If they allow one to buy some collectables on ebay that will generate no value, then they should not care about crypto, especially since long term investments see great returns.
Think about it. Wide adoption at the end of 2017, bit licenses, crypto-funds, etc etc. Look at the data. It does not lie. It's a good investment and they see some consumers using this as tool to reduce their debt faster.
Again, buying some plastic toys on ebay is ok, but crpyto is bad? It's bs.
They price the credit line (set the interest rate) based on some level of expected risk.
If they believe an activity will cost them more in bad loans (and whatever else) than they will earn in interest, they will adjust the terms of the loan to forbid that activity.
Heads up. I recently added funds into Coinbase using their instant debit card option via a Chase checking account debit card. Lord behold a few days later I had a $5.00 cash advance fee in my checking account. I called Chase and they reversed the fee, but they suggested that I contact Coinbase because indeed they are not doing a debit card debit, but a cash advance. Moral of the story, stay away from Coinbase if you can avoid them.
The payment provider Coinbase uses to transfer to/from US bank accounts (Plaid) asks for your online banking credentials and scrapes your data (income, historical balance data and more) for resale[1].
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[ 4.9 ms ] story [ 155 ms ] threadI understand the stated reasoning, but if this is the first such restriction (again, I don't know if it is), it's a pretty remarkable deviation relative to most credit card policies, i.e. we will happily finance whatever ridiculous decisions you choose to make. I wonder if they are seeing spiking default rates?
Aside from state rules, some cards prohibit it, much like this new restriction on cryptocurrency.
Also, CA is one of the states which prohibits this.
> if you use a stolen credit card to buy something you have to have somewhere to ship it, therefore they can find the thief. with cryptocurrencies they just have to take a loss and open a new card.
Necessarily results in:
> credit/debit cards security model is absolute shit and should be illegal.
Can you describe a comprehensive alternative that would, at least in theory, be better.
As an analogy: if I come in to your house and steal your gold bullion while you're not looking, leaving little trace of my presence, does that mean the security model of houses is absolute shit and should be illegal?
The option for the credit card issuers is to:
a) stop offering chargebacks for crypto purchases
b) stop allowing crypto purchases
They opted for 'b' because it's easier.
(I suppose they could eat the cost themselves, but I can't see that happening)
Porn sites have a really hard time finding payment processors, due to the high rates of chargebacks.
Yes; some examples:
https://www.bankrate.com/finance/credit-cards/naughty-things...
Normally the blocking is applied to merchants, rather than visible to the customers, but yes. Ironically this kind of thing used to be cited as a reason for bitcoin adoption.
I totally agree with your previous comments on the EFF and peoples right to privacy and secure data. Shouldn't this extend to their money as well?
I do think this article makes some good points about the current dangers of the cryptocurrency market, especially for credit card operators.
To answer your question:
Yes, I do think people deserve privacy and security in their personal finances. I'm not convinced that cryptocurrencies provide this. My reservations come mostly from the apparent (and I believe historically obvious) instability of an unregulated financial market.
Credit cards isn't a system where "anyone with a number being able to pull your money" - merchants can ask for that money, but they're not certain to get it, you can veto that transaction, you'll get it reversed (with legal guarantees) if its fraudulent, and you can get it reversed if you were sold goods that aren't what you were promised. Not so with crypto, where once you send it to someone for whatever technical reason (including a compromised number) it's gone.
I successfully churned about 60K credit card points at the end of last year. (Buy $X + fees and sell when it covered the fees/principal)
You have 100 Bitcoins. You buy 100 Bitcoins at $1,000 each on credit. You now have $200,000 of Bitcoins and $100,000 of debt. Bitcoin crashes 60% ($19k to $7.6k is a sixty percent crash). You now have $80,000 of Bitcoins and $100,000 of debt. You are insolvent.
If you’re talking about buying and selling from yourself to milk points, that’s fraud.
>If you’re talking about buying and selling from yourself to milk points, that’s fraud.
i'm not sure how that's fraud anymore than you buying goods with your credit card and immediately selling them to rack up rewards.
Buy Bitcoin on credit. Sell immediately. Deposit to bank account. Pay credit card bill. Repeat.
The only difference here is that they're explicitly saying it's banned.
And I'm pretty sure it's always been "technically not allowed" to buy another currency with credit cards (or it's technically allowed, but treated as a "cash advance")
but you could always buy gold/silver and other extremely liquid and fungible goods, which is as good as money.
They can't whitelist what you can buy with a credit card, so instead they blacklist things when they become big enough to matter.
The IRS decided that that's the category they fall into for certain tax purposes. Not sure why that would have any bearing on the application of credit card issuer policies that are not tied to the particular definitions in the tax code, though.
What parent is saying that unlike other purchases with credit cards, you can't really do much about cryptocurrencies.
For instance if you purchased a physical product, in case of a problem (like fraud or something), at least you can go to the place where the delivery of the physical product happened and find it.
Similarly in case of a digital good (like ebook or pdf, since it's mostly copied from one destination to the other) if the product wasn't delivered, then it can be redelivered with no cost to the producer.
It's the first time we are encountering a digital good with non-duplicability of physical world goods with hard tracability of cash.
The baseline for most credit cards is 120 days for the cardholder to dispute a charge in the US, or 180 days internationally. Some specific dispute categories for some credit cards have a shorter limit, and some effectively have longer limits because the starting point is some date after the transaction.
On top of that, there may be consumer protection laws in some areas that affect this. For example, in California it is one year for certain types of dispute [1].
Note that the above is how long for the cardholder to dispute the charge. Add to that however long it takes the card company to process things before the merchant sees the chargeback.
I've seen one that arrived at the merchant over a year after the transaction, although I think that is rare.
[1] https://oag.ca.gov/consumers/general/credit-cards-dispute-ch...
And these are not currencies under the law.
The incentive for most people to buy concert tickets is to see the concert or scalp the tickets; chargebacks that occur in this context are on an individual basis and the banks will ban customers that abuse this chargeback process. In some cases, the merchant may be at fault, perhaps selling tickets to a show that does not transpire as described and the concert-goers may issue chargebacks en masse in response, but in this case the banks identify the source of the problem was not _the individuals_ (who will probably have relatively few if any chargebacks in their account history) and will actually penalize the merchant, sometimes banning them altogether if they cannot reasonably explain the chargeback behavior or if chargebacks become a pattern for that merchant.
With blockchain tokens there is no incentive except profit, so if the blockchain token markets create a panic among buyers, it can cause mass chargebacks at _any_ time within the chargeback window, this is clearly a completely different risk model than concert tickets. At the end of the day, all that's really happening here is the credit card companies are banning transactions from merchants with high chargeback history, a totally common practice.
Chargebacks can be initiated at any time within the chargeback window, regardless of what is purchased.
Further, chargebacks hurt the MERCHANT. MERCHANTS are the ones banned and blacklisted (there is a blacklist file shared among all VISA issuers) for bad behavior.
IF merchants had high chargebacks, they would state that - there is no NDA preventing the card issuers from stating it.
And even if there were, there are higher-risk tiers for such merchants (like merchants that sell online porn).
How much experience do you have dealing with VISA etc. ...?
See https://news.ycombinator.com/item?id=16262640
Yes, but as I already explained, the incentive to chargeback is NOT the same regardless of what is purchased. Chargebacks are relatively rare because most people only chargeback if there is a dispute with the merchant, but outside of fraudsters, its not that common for people to chargeback on a product months later. Even with high risk products like porn, there are predictable chargeback rates that can be factored into the overall profitability of the product category, but with blockchain tokens a sudden shift in price (like the one we're seeing now) can cause a large and abrupt spike in chargebacks all from the same product category. Wild shifts in the price of a digital commodity is a unique quality of blockchain tokens that totally changes the chargeback risk profile.
> How much experience do you have dealing with VISA etc
How much experience do you have in the lending business? This has nothing to do with VISA, this is about banks that have to make a decision about lending money. Companies that lend money are valued in large part based on the quality of the loans on their books; when the books are loaded up with crap accounts made up of gambling debt from blockchain enthusiasts who could go bankrupt overnight, it does not inspire confidence.
I have actual experience as a credit card merchant for 10+ years. You have shown yourself to have no real-world knowledge of the situation.
Mahatma Gandhi
Believe it or not, many ignored/laughed-at people, movements, etc. throughout history wound up not winning.
(you know, like scamming people)
https://news.ycombinator.com/newsguidelines.html
https://news.ycombinator.com/newsguidelines.html
A lot of folks on here are proponents of net neutrality. I think banking should be neutral, too.
Um.... they aren't protecting people from themselves. The bank is are protecting themselves from their customers -- both from fraud the bank becomes liable for and god knows what legal regulations.
BofA doesn't give a fuck about you, they are doing this to cover their own ass.
>The move doesn’t affect debit cards, according to Betty Riess, a spokeswoman for the Charlotte, North Carolina-based lender.
>Allowing purchases of cryptocurrencies can create big headaches for card lenders, which can be left on the hook if a borrower bets wrong and can’t repay. There’s 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 isn’t as easy once dollars are converted into digital coins.
This isn't strictly true. These same banks have been known to close accounts that are associated with known crypto exchange transactions (coinbase, bitstamp, etc.) - to the point of most recommending you keep these transactions entirely separate and try to avoid them if possible.
I was originally interested in Bitcoin exactly due to this. Money in the bank is not your money, and that was made exceedingly clear to me on a few occasions. That they are corner cases and outliers is irrelevant to me - that's where the system breaks down and you find out exactly how powerless you really are until you're into 8 figure territory.
Basically do anything a bank determines is risky and you more or less forfeit your access to the US banking system.
Large banks actively choose winners and losers and who you can send your money to every single day. Try buying porn on-line with some credit cards for example.
I don't particularly think buying crypto with a credit card is a great idea, but it certainly highlights how much the war on cash and ever increasing centralized banking really has significantly reduced your personal freedom in just a couple decades.
Banks agreed to extend credit to Bob from accounting so that he could buy consumer goods, not so he could participate in leveraged trading. The average individual is utterly unprepared for that risk and doesn't understand it, and banks aren't prepare to accept that risk. If you force them to, they will be much more conservative in who they give credit to, and the average user will lose out as a result. It's far easier to ban stupidly risky behavior than build it into their credit models.
Also, if people want to do leveraged trading, there are mechanisms to do it outside of credit cards. The fact that people are using credit cards in itself suggests that they are unsophisticated and should not be doing such trades.
Between that, payments to ransomware, whatever online drug markets exist, etc... can’t blame them at all.
They have legitimate reason to not take on the downside risk of crytocurrencies and their card agreements make it clear enough that they can't be used for everything.
If they were letting people purchase bitcoin on credit cards up until last Friday[, there's going to be a ton of people that racked up charges at the $15-20K price level in December that cannot pay them back. Be curious how big the damage is going to be for them.
If they are buying BTC on a credit card, they are doing it because they expect it will.
Also, what the IRS says about cryptocurrency for tax purposes has no bearing on the discussion at hand.
Some of these restrictions are clearly arbitrary.
Think about it. Wide adoption at the end of 2017, bit licenses, crypto-funds, etc etc. Look at the data. It does not lie. It's a good investment and they see some consumers using this as tool to reduce their debt faster.
Again, buying some plastic toys on ebay is ok, but crpyto is bad? It's bs.
They want $.
But I'm not sure what the motives are here. I'm pretty sure banks like it when their customers get into debt?
They price the credit line (set the interest rate) based on some level of expected risk.
If they believe an activity will cost them more in bad loans (and whatever else) than they will earn in interest, they will adjust the terms of the loan to forbid that activity.
1. see "Products" on https://plaid.com