Coinbase, one of the most popular websites in the world for selling and buying cryptocurrency, notified customers Feb. 1 that making credit card transactions on its platform may cost extra fees since it’s being processed as a cash advance.
Coinbase, based out of San Francisco, has been processing customers’ credit card transactions as cash advances for weeks now, which hasn’t gone unnoticed by savvy customers and experts. However, this announcement is a recent development, and it might be the first notification about the cash advance billings for many customers.
Why This Matters
Coinbase enjoys enormous popularity, having approximately 13 million users in two dozen states and in various countries. But as Coinbase has been quick to point out, it isn’t the entity cashing in on those cash-advance fees. The credit card companies are the ones profiting.
Because the merchant category code assigned to digital currency purchases by customers has been modified by many of the big credit card companies, those companies are now able to charge extra cash advance fees.
“These additional fees will show up as a separate line item on your card statement,” Coinbase said in an article on MarketWatch.
This switch in policy comes on the heels of an announcement by card issuers and banks who have been scrutinizing cryptocurrency purchases from buyers who use credit cards. Many of these banks and card issuers are looking to restrict cryptocurrency transactions.
Capital One Financial Corp. has blocked people from using their credit cards to buy bitcoin or other cryptocurrencies. They aren’t the only company to study the issue and make changes to policies regarding cryptocurrency – Bank of America and other lending giants are looking at the issue as well.
Cryptocurrency Under Close Scrutiny Elsewhere
South Korea has threatened to shut down crypto trading in its region. And even domestically, officials at the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission have promised to oversee digital currency more closely.
Some concerns exist about criminals potentially using digital currency for anonymous transfers of funds. Those concerns have led to an increased call for tracking and accountability for the industry. Entities are worried about the possible fraud in the cryptocurrency world – and some investors share that worry as well.
With negative stories about cryptocurrency routinely showing up in the news, such as the Japanese $500 million cryptocurrency hack recently, investors are concerned about the security of digital coins.
All this uncertainty for cryptocurrency has been hitting the industry hard. Bitcoin had been riding high at the end of 2017, reaching its top value at close to $20,000. But more recently, that figure has been in the low $9,000 range, which is a drastic drop during that short amount of time.
Famed economist Robert Shiller, as well as other experts, have been critical of bitcoin’s future. Shiller had made earlier predictions that bitcoin’s price would drop. Other experts have agreed with Shiller’s perception of bitcoin as not being a permanent player in the future of currency.
Author: Mike Brown
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