American multinational financial services company Wells Fargo bans crypto purchases with credit cards according to a Fortune report.
Wells Fargo Bans Crypto Purchases With Credit Cards
While the ban on the purchase of cryptocurrency will be ongoing, Wells Fargo “will continue to evaluate the issue as the market evolves,” said spokeswoman Shelley Miller.
She also noted:
“We’re doing this in order to be consistent across the Wells Fargo enterprise due to the multiple risks associated with this volatile investment. This decision is in line with the overall industry.”
Thus, Wells Fargo joined Lloyds Bank, Citigroup Inc., JPMorgan Chase, Bank of Montreal, and Bank of America Corp., which also limited the purchase of cryptocurrency by using their credit cards in February, citing market volatility and credit risks.
As representatives of these financial institution noted, they worry that clients, by purchasing cryptocurrency with credit cards, lose money and can not repay the loan.
According to last year’s research by LendEDU, approximately 18% of investors used a credit card to purchase bitcoins. 22% of them could not pay off the balance after buying the cryptocurrency.
First of all, banks protect themselves from non-repayment of loans, because the cryptocurrency is quite volatile. Despite the fact that most of tokens grew in price in 2017, now the crypto market is in red following correction. Therefore, those clients of the bank who used borrowed funds, including credit cards, to buy cryptocurrencies, can not possibly now repay a loan or even make a minimum monthly payment. Of course, banks do not like it. This is the main reason. The second reason, less important, perhaps, is the use of credit cards to get miles or cashback. Some bank customers used it to get bonuses where banks did not want to.
Crypto market decline
On Monday, June 11, Bitcoin rate fell below $ 7,000 after announcement that Coinrail exchange was hacked. Besides, information that CFTC demanded from the cryptocurrency exchanges data on the course trading because of possible manipulation in the bitcoin futures market, affected the market decline.