U.S. banks are escalating their crackdown on cryptocurrency purchases via credit cards. Bank of America, the second-largest bank in the United States, announced on February 2, 2018, that it will no longer accept credit card transactions for the purchase of cryptocurrencies such as bitcoin. This decision follows similar moves by JP Morgan Chase and Citigroup, signaling a coordinated effort by traditional financial institutions to distance themselves from the volatile digital asset market.
Banks Unite Against Crypto Credit Purchases
According to reports from Bitcoin.com, Bank of America has notified its customers that credit card payments to cryptocurrency exchanges like Coinbase will be blocked, effective immediately. Debit card transactions remain unaffected. Citigroup implemented the same policy on the same day. The banks justify the bans as a measure to protect consumers from the risks of borrowing money to buy highly speculative assets. During the price rally in late 2017, many investors used credit cards to purchase bitcoin, and subsequent price declines raised concerns about widespread defaults.
Visa and Mastercard have also tightened their policies. Both payment networks have reclassified cryptocurrency purchases as “cash advances” rather than standard purchases. This reclassification imposes an additional fee of approximately 5% on each transaction. For instance, a $5,000 bitcoin purchase on Coinbase would incur an extra $250 in fees. This change effectively makes credit card purchases of cryptocurrency prohibitively expensive for most retail investors. Debit card purchases are not affected by this surcharge.
Mixed Fortunes for Crypto Exchanges
While some exchanges face banking headwinds, others are finding new opportunities. In a podcast on February 2, Bittrex CEO Bill Shihara confirmed that the U.S.-based exchange would soon enable fiat currency deposits in U.S. dollars. The move is widely seen as an effort to reduce reliance on Tether (USDT), a controversial stablecoin that has faced increased regulatory scrutiny. The U.S. Commodity Futures Trading Commission (CFTC) subpoenaed Tether in late January, raising concerns about its reserves. By securing a U.S. banking partner, Bittrex aims to offer customers a direct fiat onramp, reducing dependency on Tether for trading pairs.
However, not all exchanges are enjoying banking support. New Zealand exchange Cryptopia announced that its domestic bank account would be closed on February 9, forcing an immediate halt to New Zealand dollar deposits. Cryptopia criticized the bank for providing only short notice and little opportunity to present compliance documentation. The exchange also took a veiled swipe at Bitfinex, which has a well-documented history of opaque banking relationships, stating that operating without transparency exposes customers to greater risk.
The Widening Gap Between Banks and Crypto
The banking crackdown on cryptocurrency is not a new phenomenon. Since 2013, when few banks understood bitcoin, the relationship has been fraught with tension. Now, in early 2018, banks are more knowledgeable about cryptocurrencies but remain hostile. The latest actions by Bank of America, Citigroup, JP Morgan, Visa, and Mastercard demonstrate that traditional finance institutions are building firewalls to protect themselves from regulatory liability and customer defaults.
Despite these setbacks, the cryptocurrency industry continues to adapt. Bittrex’s success in securing a bank shows that compliant exchanges can still find partners. The rise of decentralized finance (DeFi) and peer-to-peer trading may eventually offer alternatives to bank-dependent onramps. For now, retail investors face higher costs and fewer options for entering the crypto market with credit. The trend underscores a fundamental tension: while cryptocurrencies aim to bypass traditional finance, they remain heavily dependent on it for fiat access.
Will this banking boycott succeed in curbing crypto adoption? History suggests that regulatory and banking pressure often slows but does not stop innovation. As 2018 unfolds, the crypto community will likely find new ways to move money in and out of exchanges—perhaps through debit cards, wire transfers, or even decentralized stablecoins. The battle between old money and new money is far from over.