Lloyds first UK bank to ban credit card cryptocurrency purchases

Scottish banking group Lloyds has become the first UK institution to ban customers from buying cryptocurrency such as Bitcoins using credit cards.

Lloyds is the first UK bank to restrict purchases of currency such as Bitcoin.

The Edinburgh-based firm said credit card holders at its Bank of Scotland, Halifax, Lloyds and MBNA brands would not be able to purchase the virtual currency from this week.

The move follows similar recent decisions by American banks including Citigroup, JP Morgan and Bank of America, amid concerns over the rapid fall and rise in the value of currencies such as Bitcoins. Banks in South Korea, China, Russia and India have also banned credit card purchases. Financial companies fear that customers could get deep into debt if customers have borrowed to invest and the value of the currency slips further.

It is believed that debit card purchases are not affected.

Bitcoin, which was the first cryptocurrency to launch in 2009, is a decentralised digital currency that enables fast, low-cost payments to anyone anywhere in the world. The value of Bitcoin reached the $20,000 mark in December, but slumped to below $8,000 in January.

A spokeswoman for Lloyds Banking Group said: “Across Lloyds Bank, Bank of Scotland, Halifax and MBNA, we do not accept credit card transactions involving the purchase of cryptocurrencies.”

A report released last month by consumer group Lendedu found that 18 per cent of investors buy Bitcoin with borrowed money. Meanwhile, around a third use debit cards to do so. Meanwhile, over 70 per cent of the respondents who used credit cards and interest-bearing loans, said they believed owning bitcoin was “worth the interest expense”. Critics of the currency say that it can be used for clandestine transactions of illegal goods.

Facebook banned adverts for Bitcoin and other cryptocurrencies on its sites after recent criticism from users about scams and hoaxes being promoted in their newsfeed.

Meanwhile, Prime Minister Theresa May recently vowed to ‘very seriously’ consider the future of Bitcoin, saying there should be closer scrutiny of the volatile money markets. Germany’s Bundesbank has also called for global regulation of Bitcoin and France’s finance minister wants tougher rules for cryptocurrencies.

Speaking at Davos, she said: “She said: “Cryptocurrencies like Bitcoin, we should be looking at these very seriously, precisely because of the way that they can be used, particularly by criminals.”

Research produced by the University of Cambridge last year estimated that there are 2.9 to 5.8 million unique users worldwide who are using a cryptocurrency wallet, most of them using Bitcoin.

An increasing number of online retailers, including travel site Expedia, have recently started accepting Bitcoin for some payments.

A spokesman for the Royal Bank of Scotland said: “We constantly review transactions but do currently accept credit card transactions for cryptocurrencies.”