The U.S. banking system is accelerating its separation from cryptocurrencies. Bank of America, the country's second largest bank, has officially stopped accepting credit card transactions for cryptocurrency purchases, joining JP Morgan Chase and Citigroup in a collective crackdown. The move signals an escalating conflict between traditional financial institutions and the nascent digital asset space.
Banks Ban Bitcoin Credit Card Purchases
As of February 2, 2018, Bank of America began blocking credit card purchases of bitcoin and other cryptocurrencies from exchanges such as Coinbase. Debit card transactions remain unaffected for now. The decision follows similar announcements by JP Morgan Chase and Citigroup earlier that week. The banks' primary justification is risk management: many customers were borrowing heavily to buy bitcoin during the late-2017 price rally, and the subsequent crash left them unable to repay their debts, raising the specter of defaults. In December 2017, bitcoin surged to nearly $20,000, prompting a wave of credit-fueled buying. By February 2018, the price had dropped significantly, confirming the banks' fears.
The crackdown is not limited to the United States. In Europe, a Visa subsidiary orchestrated a broader crackdown on crypto-linked debit cards. The overall regulatory climate is becoming increasingly hostile toward cryptocurrencies, and banks—conservative by nature—are choosing to distance themselves.
Visa and Mastercard Reclassify Crypto as Cash Advance
Beyond direct credit card bans, payment giants Visa and Mastercard have also tightened the screws. Both companies have reclassified cryptocurrency purchases from exchanges like Coinbase as "cash advances" rather than standard purchases. This reclassification triggers an additional 5% fee on each transaction. For a $5,000 bitcoin purchase, that means an extra $250 in fees—likely enough to deter most investors from using credit cards. Debit cards are unaffected, but the credit card channel is now effectively throttled.
This change further reduces the onramps for ordinary users to enter the crypto market and highlights payment networks' cautious stance toward volatile assets.
Exchanges Face Mixed Banking Fortunes
While major banks retreat, some exchanges are gaining limited traditional finance support. Bittrex CEO Bill Shihara confirmed on a February 2 podcast that the U.S. exchange will soon enable fiat currency deposits in U.S. dollars. The move is widely seen as an attempt by Bittrex to reduce reliance on Tether (USDT) as a quasi-fiat currency. Both Bittrex and fellow U.S. exchange Kraken have depended heavily on Tether, but after U.S. regulators subpoenaed Tether last month, Bittrex wants to diversify its fiat options.
In contrast, New Zealand's Cryptopia suffered a sudden banking withdrawal. The exchange announced that its domestic bank will close its NZDT account on February 9, with extremely short notice. Cryptopia complained that the bank gave "little opportunity to present our case and provide compliance documentation." The exchange made a pointed remark about other platforms that "choose to operate by opening bank accounts without being transparent (and running these until they get shut down)"—a clear reference to Bitfinex's opaque banking practices. Cryptopia argued that such behavior exposes customers to greater risk and uncertainty.
From 2013, when banks barely knew what bitcoin was, to 2018, when they understand it but want nothing to do with it, the path for moving money in and out of crypto exchanges remains as difficult as ever. Despite surging public interest, the friction between traditional finance and decentralized currencies continues to grow.
These events underscore that for cryptocurrency to achieve mainstream adoption, it must overcome significant hurdles in compliance, transparency, and stability. The tug-of-war between banks and crypto is far from over.