Canadian banks aren’t following UK, US, Australia ban on buying cryptocurrency with credit
The Commonwealth Bank of Australia (CBA) announced recently that it would no longer allow customers to purchase cryptocurrencies with credit cards, as Bitcoin’s price has plunged by more than 50 per cent since Christmas.
“We have made this decision because we believe virtual currencies do not meet a minimum standard of regulation, reliability, and reputation when compared to currencies that we offer to our customers. Given the dynamic, volatile nature of virtual currency markets, this position is regularly reviewed,” said the bank in a statement.
Canadian banks, however, have yet to follow suit. Toronto-Dominion Bank, for example, which is Canada’s largest lender by assets, allows cryptocurrency transactions using a TD credit or debit card as long as the merchant is authorized to accept Visa, Mastercard, Interac or Visa Debit.
Julie Bellissimo told Bloomberg on Monday that the transactions are allowed, as they aren’t determined to be fraudulent.
Canada’s second-largest lender, RBC, said there are “limited circumstances” in which customers would be allowed to complete cryptocurrency transactions using a credit card.
“We recognize that regulatory, risk and other external environmental factors relating to cryptocurrency continues to evolve,” RBC spokesman AJ Goodman said in a statement. “As such, we continue to review our policies to consider how we can best support clients.”
CommBank isn’t the first lender to take this route. Several major American and U.K. banks, including JP Morgan Chase & Co, Bank of America, Citigroup UK, Lloyds Banking Group, Bank of Scotland, MBNA and Lloyds have opted to halt credit card purchases of Bitcoin and other cryptocurrencies.
Bank of America and Citigroup both enacted the ban on Friday, while JP Morgan made the announcement on Sunday.
Joshua Gans, a professor of strategic management at the University of Toronto, said that banks may be imposing limits on cryptocurrency purchases to protect themselves in case consumers are unable to repay their loans.
“It may also be limited because banks are concerned that it is effectively gambling and that this could make it hard for consumers to pay them back. I suspect you can’t place bets on horse racing or buy casino chips with credit cards either.”
According to Gans, it’s “a bit odd” that Canadian banks have done little to limit or prevent credit card purchases of cryptocurrencies, given their volatility in recent months.
However, he added that a lack of action could be a “tacit admission” on the part of Canada’s banks that, for credit card companies, Bitcoin and cryptocurrencies can effectively serve the same purpose as cash.
“After all, banks make money when you take out a cash advance on a credit card — they charge you interest. But instead, you can buy Bitcoin you can get that cash advance for ‘free.’ It isn’t really free because you will likely have to pay a 2.5 per cent commission that finds its way back to the credit card company,” Gans said.
The Bank of Canada has called for regulation of the digital currency space on more than one occasion.
In a recent interview with CNBC, Bank of Canada Governor Steven Poloz called Bitcoin “gambling” and called for further regulation of the industry.
Bitcoin prices fell to below US$7,300 on Monday and currently sit at around US$9,000, well off their highs of just over US$20,000 in January.
Global News reached out to TD and RBC for comment and will update with their responses.
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