In early February 2018, Bank of America, the second largest U.S. bank by assets, became the latest financial institution to prohibit credit card transactions for cryptocurrency purchases. Joining JPMorgan Chase and Citigroup, which announced a similar policy on the same Friday, the move signals a coordinated backlash from traditional banking against the crypto craze. At the same time, payment giants Visa and Mastercard reclassified deposits at exchanges like Coinbase as “cash advances” rather than standard purchases, imposing an additional 5% fee on each transaction.
Banks vs. Bitcoin: A Growing Divide
Over the past 12 months, bitcoin had gained significant mainstream attention, but the financial establishment responded with a wave of restrictive measures. Bank of America’s decision was not isolated — Citigroup also confirmed it would cease allowing credit card purchases of cryptocurrencies. From a business perspective, these institutions aim to shield themselves from the risk of customers borrowing recklessly to buy volatile digital assets. During the price rally in December 2017, many investors used credit cards to leverage their crypto bets, only to face severe losses when the market corrected. Banks now view such behavior as a direct threat to their credit portfolios.
The crackdown extends beyond U.S. borders. A Visa subsidiary had previously orchestrated a Europe-wide clampdown on crypto debit cards, and overall regulatory pressure on crypto assets has intensified. A Bank of America spokesperson stated that the policy was designed to “protect customers and the bank from potential financial risks.” While debit card transactions remain unaffected, the closure of the credit card on-ramp raises the barrier for retail investors entering the market.
Visa and Mastercard Impose Steeper Costs
The payment processors’ reclassification of cryptocurrency purchases as “cash advances” effectively adds a ~5% surcharge. For a $5,000 bitcoin purchase on Coinbase using a Visa card, the fee would amount to approximately $250. This change, while not affecting debit card users, is likely to end the era of credit card-funded crypto buying for most retail investors. The move reflects a cautious stance by Visa and Mastercard, which seek to limit their exposure to a highly volatile asset class still under regulatory scrutiny.
Exchange Banking Woes: Bittrex Gains, Cryptopia Loses
Amid the general hostility, some exchanges managed to secure limited banking support. Bittrex CEO Bill Shihara confirmed in a podcast on February 2 that the U.S. exchange would soon enable U.S. dollar fiat deposits. This is widely seen as an effort by Bittrex to reduce its reliance on Tether (USDT), whose credibility was shaken after U.S. regulators subpoenaed the company the previous month. Bittrex and Kraken had been using USDT as a pseudo-fiat currency; now they seek more compliant banking partnerships.
In contrast, New Zealand-based exchange Cryptopia faced a sudden termination of its domestic banking services. The exchange announced that its bank would close its NZDT account on February 9, giving only days of notice. Cryptopia stated it had “little opportunity to present our case and provide compliance documentation.” The exchange also took a veiled swipe at Bitfinex, which has been criticized for opaque banking arrangements. The stark contrast between Bittrex’s progress and Cryptopia’s setback underscores the persistent difficulty of moving money in and out of crypto exchanges.
Since 2013, when banks barely understood bitcoin, the situation has evolved but not improved. In 2018, banks are fully aware of cryptocurrencies, yet the vast majority want nothing to do with them. The structural barrier between traditional finance and digital assets remains as high as ever, forcing the crypto industry to seek alternative pathways for fiat access.
This article is based on original reporting from February 2018 and is provided for historical reference.