Monday, February 05, 2018

More Banks Ban Credit Card Crypto Purchases, Time To Call BS

I read during my routine morning news browsing that Lloyds Bank Group Plc has joined in with the likes of JP Morgan and Citigroup in cutting off crypto purchases with the credit cards that they've issued.

The alleged rationale for this:
"Banks in Britain and the United States have banned the use of credit cards to buy Bitcoin and other “crypto currencies”, fearing a plunge in their value will leave customers unable to repay their debts." -- L. White and E. Rumney
This is utter crap. If this is truly the concern that they have, then these banks, and all others considering similar moves, should immediately block peoples' ability to buy anything with their credit cards that could lose value.

No more books on Amazon. No more meals out with friends. No more Xbox games. No more lattes at Starbucks. No more Vegas vacations. No more trinkets and baubles and knick-knacks of any sort.

The vast majority of things that people buy with credit cards only lose value, typically the majority of it evaporating as soon as the item is purchased! Just imagine your credit card issuer calling you up to say, "hey, those groceries you keep buying, we've run an analysis and found that they've consistently lost 100% of their value over time, we're going to block your purchases at Albertson's." Sound ridiculous? It is, but that's the reasoning they're selectively applying here.

The difference being of course that someone's Bitcoin purchase via credit card could very easily shoot up in value...

That said, since when do these banks issue credit cards based on the likelihood of the things you buy with them going up in value? They don't! They issue credit cards based on your assumed future income net of debt servicing obligations, your net monthly cash flow. Their questions are only about your income and other debts when you apply. They never ask about your assets!

So this is utter nonsense, and given that cryptos represent a challenge to the future profitability of traditional banks, these moves and the alleged motivation to "protect customers" are highly suspect.

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