Capital One Blocks Cryptocurrency Purchases With Its Card
In a first, Capital One Financial Corporation
(COFCOFCapital One Financial Corp105.14-0.28%)
has blocked holders of credit cards from its bank from using them for cryptocurrency purchases. In a statement to Breitbart news, the company said it made the move due to “limited mainstream acceptance (of cryptocurrencies) and the elevated risks of fraud, loss, and volatility inherent in the cryptocurrency market.”But that decision is subject to change. “Capital One continues to closely monitor developments in cryptocurrency markets and exchanges and will regularly evaluate the decision as cryptocurrency markets evolve,” the bank wrote.
Capital One’s decision to block purchases was first reported by online publication The Merkle, which cited a Reddit thread regarding the issue. In the thread, a Coinbase user reported that his purchase of $90 in cryptocurrencies was blocked by the bank. Capital One subsequently tweeted a clarification. (See also: IMF Chief Lagarde's Comments On Bitcoin Have Big Implications.) While most banks have held off from offering cryptocurrency-related services to customers, they have not blocked transactions involving them. Capital One joins TD Bank, which is reported to have told customers that “it doesn’t deal in that kind of business.” PNC Bank is another bank that blocked transactions involving cryptocurrencies. It is unlikely that other banks will follow Capital One’s lead.
The size of cryptocurrency markets has ballooned in the last year, and prices for individual tokens have skyrocketed as day traders and investors have rushed to put their money into the assets with exponential returns. However, much of the increase in cryptocurrency valuations has occurred on the back of speculation about future prospects. The timeline for that future is still hazy, however. While they have warned about the dangers of investing in cryptocurrencies, government regulators have stayed away from them for the most part. This has resulted in extreme price volatility and scams. As talk of regulation and institutional money flowing into the markets gathers pace, it is likely that Capital One might revise its stance regarding cryptocurrencies. (See also: Bitcoin Government Regulations Around The World.)
Investing in cryptocurrencies and other Initial Coin Offerings ("ICOs") is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns small amounts of bitcoin. It is unclear whether he owns other bitcoin forks.