UK Edition
Lloyds Bank in Bitcoin crackdown: credit card owners banned from buying cryptocurrency
Britain's biggest bank has become the first to announce a ban on customers using credit cards to buy Bitcoin amid fears they could run up huge losses.
Lloyds Banking Group will on Monday tell its 9 million credit card customers that it will block any attempts to buy Bitcoin after the digital currency lost more than half its value in just two months.
The price of Bitcoin has fallen by 57 per cent from £14,000 in December to less than £6,000 and the bank fears it could end up footing the bill for unpaid debt should the price fall any lower.
It is believed that hundreds of thousands of British people invested in the cryptocurrency last year amid its extraordinary 13-fold increase.
But from Monday credit card customers of Lloyds, which includes Halifax, Bank of Scotland and MBNA, will be blocked from buying the cryptocurrency online via a blacklist which will flag up sellers. While Lloyds is the first, it is thought that other banks will shortly follow suit.
The bank fears that credit card owners are buying Bitcoin with money borrowed on credit cards in the hope that they will make a profit when its value goes up, but becoming laden with debt if its price falls.
Concerns are also growing that Bitcoin and other cryptocurrencies are being used for drug dealing and money laundering.
Lloyds's decision follows several of the biggest US banks banning credit card payments last week as part of a broad crackdown on Bitcoin that saw its price tumble to a three month low. JP Morgan, Bank of America and Citigroup said they would block attempts to buy digital currencies.
A spokesman for Lloyds said the decision was made to "protect customers" from making unaffordable losses on Bitcoin but that people will still be able to buy digital currencies with debit cards. It is understood to be a pre-emptive move to avoid heavy losses in future as interest in Bitcoin peaks.
Lloyds is the UK’s biggest banking group with around 30 million customers, and has a quarter of the market for credit cards. It is the first major credit card provider in the UK to block off access to Bitcoin.
Gavin Brown, a finance lecturer at Manchester Metropolitan University, said: “For some people, the only way to finance this level of speculation is through credit, with people just doing it to make a gain.”
Bitcoin, which was created in 2009 and is not governed by any central authority, has long been viewed with scepticism by banks and financial regulators. The currency exists only online and accounts are anonymous, leading to fears that it is used by cyber criminals. It has been the currency of choice of online black markets and many hackers who demand ransom payments.
However, many amateur investors piled into the currency last year as its price rose rapidly and it drew comparisons to gold, creating fears of a bubble. At the start of 2017 it was worth just £700 but its rapid rise turned early investors into overnight millionaires.
Bitcoin’s price has collapsed this year as multiple governments, particularly in Asia, have announced greater scrutiny. More than £150bn was knocked off the entire cryptocurrency market last week alone as the Indian government warned that it would “take all measures to eliminate” its use as a payment system.
Facebook also announced that it would ban adverts featuring Bitcoin and other digital currencies, saying there was a flurry of “deceptive” scams.
Earlier this year Theresa May warned that it needs to be looked at “very seriously” because of potential illegal uses. “Cryptocurrencies like Bitcoin, we should be looking at these very seriously, precisely because of the way that they can be used, particularly by criminals,” she said.