Lloyds Banking Group has banned customers from buying Bitcoin and other cryptocurrencies on its credit cards because of fears they could be left in debt as the value falls.
The banking group, which includes Bank of Scotland, Halifax, Lloyds Bank and MBNA, is thought to be the first in the UK to ban credit card customers from borrowing to buy the digital currency. And the ban represents a highly unusual restriction on an entirely legal and relatively common credit card transaction.
For more on the basics of Bitcoin, how it works and how risky it is, see Martin’s Should you invest in Bitcoin? blog.
Why has Lloyds banned Bitcoin purchases?
Bitcoin is a type of cryptocurrency – essentially digital money that is designed to be secure. There are several ways to invest, but probably the most common is to put your money into an exchange – a website where traders buy and sell Bitcoin using different currencies.
Bitcoin’s slide has led to concerns that people who borrow money to purchase it will be left with large debts.
Significant numbers of people in Britain are thought to have bought Bitcoin as it surged in value, peaking at nearly £14,465 in December. But since then the value has decreased rapidly, and one Bitcoin is now worth just £5,555.
Lloyds’ ban on credit card purchases applies with immediate effect from today, with a spokeswoman for the banking group saying: “Across Lloyds Bank, Bank of Scotland, Halifax and MBNA, we do not accept credit card transactions involving the purchase of cryptocurrencies.”
The ban covers not only Bitcoin, but all cryptocurrencies, such as Litecoin and Zcash.
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Could banks ban other risky purchases?
We asked Lloyds if it plans to follow up its ban on cryptocurrency purchases with bans on other purchases that risk putting customers into debt, such as gambling, and it told us: “We regularly review our policies and procedures and take actions to protect our customers from identified risks.”
We’ve also asked other banks if they intend to follow Lloyds in banning cryptocurrency purchases, or if they intend to restrict other purchases that risk putting customers into debt.
- Nationwide told us it has no policy that blocks its customers from using their cards, including credit cards, to buy Bitcoin. It says it has no plan to change this or block other purchases.
- Barclays likewise told us customers can use their credit cards to buy cryptocurrency, though it said it was “keeping this matter under close review”.
- Santander said that it will “continue to monitor” cryptocurrencies, as it does with anything that could impact customers.
We are waiting to hear back from HSBC and RBS, and will update this story when we hear back.