Another Blow For Bitcoin As Lloyds Bank Bans Bitcoin Purchases

On Monday (5th February 2018) Britain’s major bank followed the lead of US counterpart and banned clients from using credit cards to purchase Bitcoin, amid fears they could run up to huge losses. Credit card holders of Lloyds, that includes Halifax, Bank of Scotland and MBNA, will be prohibited from purchasing the cryptocurrency online, through a blacklist that will flag up traders. Lloyds Banking Group will notify its 9 million credit card holders that it will block all the attempts to purchase Bitcoin. This decision comes after the virtual currency lost more than half of its value in just 2 months. The value of the currency has gone down by 57 % (from $14,000 to less than $6000) on Sunday night and the bank fears it could end up footing the bill for unpaid debts if it continues to drop further. The bank has the fear that clients are buying Bitcoin on credit cards with the expectation that they will make a profit as the price goes up but neglects the reality they will be burdened with debt when the value goes down. Concern also continues to raise that Bitcoin & other crypto-currencies are being utilized for money laundering and drug dealing. Last night, a spokesperson for Lloyds said that the verdict was made to “protect customers” from making unaffordable losses on Bitcoin however people would still be capable to purchase virtual currencies with debit cards. It is considered to be a defensive move to stay away from serious losses in future as awareness in Bitcoin grows. Gavin Brown, a finance lecturer at Manchester Metropolitan University, gave the statement: “FOR SOME PEOPLE, THE ONLY WAY TO FINANCE THIS LEVEL OF SPECULATION IS THROUGH CREDIT, WITH PEOPLE JUST DOING IT TO MAKE AGAIN.” A year ago, many amateur investors pile into the currency when its value began to climb rapidly. It drew a comparison to the gold rushes that lead to the fear that the bubble would explode. In the beginning of 2017, Bitcoin was worth $US700 and its rapid growth turned early shareholders into overnight millionaires. Bitcoin’s price has fallen down this year as many governments, particularly in Asia, have declared greater inspection. Last week more than $US150 billion was knocked off the entire cryptocurrency marketplace as the Indian government warned it would “take measures to eliminate” its use as a mode of payment for illegitimate activities. Facebook also announced that it would ban advertisement that features Bitcoin and other virtual currencies, stating that there had been flooding of scams. Lloyds’s decision is followed by the lead of several big US banks that last week banned credit card payments on Bitcoin as its price stumbled to a three-month low. JP Morgan, Bank of America and Citigroup also signaled that they too would block attempts to buy digital currencies. While Lloyds is the first bank to take action, it is thought that others will follow suit.