Is Lloyds’ decision to ban credit card holders from purchasing cryptocurrency an overreaction?
It is quite clear from Lloyds’ reaction to the blockchain market that the bank fundamentally lacks an understanding of the technology. Out of the 700 or so cryptocurrencies in existence, there are many that, while not completely shielded from the bitcoin fallout, are completely legitimate in both their nature and application.
By restricting consumers from utilising, or even speculating on them, Lloyds completely undermines healthy areas of growth in the financial industry.
Additionally, the restriction will have little to no impact on those that are resolute; there are a wealth of buying and trading platforms that route through other services. A simple Google search will provide a bypass.
All Lloyds has done is irritated those few of its customers who are investing in cryptocurrencies – and shown any prospective new customer that this is an aged and inflexible institution.
This, combined with the bank’s noted absence from the R3 consortium that researches blockchain uses in finance, could be a warning sign for shareholders.
It might seem strange for a crypto aficionado to be defending Lloyds’ position. But accusations of an overreaction, or cries that this is the start of a substantial shift towards wider regulation, are pure hysteria.
It isn’t a bank’s place to tell customers how to spend their money, and this will be a bitter pill to those crypto enthusiasts who believe in deregulation and decentralisation. But UK banks already frown on their customers using loans for investments. They have never looked favourably upon customers using credit cards to speculate or pay off debts, and this is no different.
The vast majority of crypto buyers are buying for investment purposes. The value of crypto has recently fallen, and Lloyds will – understandably – be wary of having to cover customer debts should it crash. This move therefore really can’t be seen as irrational or unexpected.
Still, it will be interesting to see how a bank could obstruct third-party companies from accepting payments. This will be more difficult to police.