Lloyds Banking Group has become the first UK banking chain to ban the purchase of cryptocurrencies such as Bitcoin by credit card.
The Lloyds Banking Group, which also encompasses Halifax, Bank of Scotland, and MBNA, has banned its customers from buying bitcoin with their credit cards.
A Lloyds Banking Group spokesperson said: ‘Across Lloyds Bank, Bank of Scotland, Halifax and MBNA, we do not accept credit card transactions involving the purchase of cryptocurrencies.’
The move follows similar action taken by financial institutions in America, where credit cards issued by Bank of America, JP Morgan Chase and Citigroup are now restricted from Bitcoin purchases due to the associated risks.
The incredible rise of Bitcoin in 2017 saw the cryptocurrency’s value boom from $800 in January to $19,783 in late December.
However, since the December peak the value has plummeted to just under $8,000 and understandably, banks are worried about their customers getting caught up in the craze.
There is considerable worry in the banking industry that investors will borrow on credit card to purchase cryptocurrencies and then be caught out by the volatility seen in value and left unable to repay their debts.
The controversial rise of bitcoin has also caught the attention of politicians around the world.
UK Prime Minister Theresa May said at the World Economic Forum in Davos: ‘In areas like cryptocurrencies, like Bitcoin, we should be looking at these very seriously, precisely because of the way they can be used, particularly by criminals.’
South Korea has already introduced rules that limit cryptocurrency trading to real-name bank accounts. Germany’s Bundesbank has also called for global regulation of Bitcoin and France’s finance minister wants tougher rules for cryptocurrencies.
Meanwhile, Facebook has banned adverts for Bitcoin and other cryptocurrencies on its sites after recent criticism from users about scams and hoaxes being promoted in their newsfeed.
Critics say cryptocurrencies are used by criminals and rogue states to carry out clandestine transactions.