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Bitcoin’s downward spiral in value isn’t poised to get any better, after a recent announcement from big credit card companies that they’ll no longer allow customers to make bitcoin purchases with their cards. Citigroup, JPMorgan Chase, and Bank of America have all joined the ranks of the companies who have enacted a bitcoin ban.
Why Have a Ban?
Cryptocurrency is in its infancy, and how to best regulate this growing market is still up in air. As such, many of the bigger credit card companies are opting to proceed with caution, changing their rules as they learn more about the cryptocurrency market, its risk, and its volatility. Previously, investors were able to make bitcoin purchases with their credit cards, but this practice was put to an end by some major players.
The current ban may not be in effect forever – it could change depending upon how things unfold with cryptocurrency in the future. And credit card companies are upfront about the possible changes down the road as new legislation is possibly enacted to make regulations more intense surrounding cryptocurrency.
“We will continue to review our policy as this market evolves,” The Wall Street Journal was told by a Citigroup bank spokeswoman.
Credit card companies are always worried about the impact of spending on their business, and this cryptocurrency public feeding frenzy is no exception. The reason card companies have been so concerned about bitcoin and other cryptocurrency is the potential losses it could mean for them.
One of the problems experts have noted with cryptocurrency is its high potential for fraud. And more fraud losses can spell a major headache and financial hit for credit card companies. With fraud, the customers aren’t the ones who are stuck paying the bill – the credit card company is the one who has its bottom line impacted.
And since cryptocurrency carries a high risk of fraud, companies potentially could lose a lot of money.
Cryptocurrency Struggling Worldwide as Regulatory Pressure Mounts
Bitcoin and other cryptocurrency enjoyed enormous increases in value in 2017. It started that year off at just around $1,000 per bitcoin. By late 2017, that value had surged to almost $20,000 per coin. That increased profit was stoking the fire for people’s fascination with cryptocurrency.
But in recent days, bitcoin has gone bust. It has drastically dropped in value lately, with one bitcoin only worth $6,600 in early February. That’s still a dramatic increase from its value at the beginning of 2017, but it’s a steep drop off from its peak value.
Part of the reason for its stunning fall is because of governmental pressure to regulate bitcoin and other forms of cryptocurrency.
Allegations have arisen about online coin offerings skirting the registration process with the U.S. Securities and Exchange Commission. That’s happened in the U.S. with a Dallas-based firm rolling out a large coin offering.
Elsewhere in the world, such as South Korea, cryptocurrency is also raising concerns as it is being watched as a source of possible tax evasion. South Korea has been examining closely whether it should enact a ban on cryptocurrency altogether as a solution to the problem.
Author: Mike Brown
In his role at LendEDU, Mike uses data, usually from surveys and publicly-available resources, to identify emerging personal finance trends and tell unique stories. Mike’s work, featured in major outlets like The Wall Street Journal and The Washington Post, provides consumers with a personal finance measuring stick and can help them make informed finance decisions.