Wells Fargo & Co (NYSE:WFC) has announced that it has banned the use of its credit cards to purchase cryptocurrencies.
The move is a major blow to the bank’s customers who are enthusiastic about cryptocurrency. They will be left with no choice other than to look for alternatives, as credit card issuing banks across the US are banning crypto payments across the board.
The U.S. bank is prepared to start declining payments with bank-issued credit cards on known cryptocurrency exchanges or brokerage platforms. While claiming that the decision is in line with the overall industry, it stated that due to the risks associated with cryptos, it was doing this in order to be consistent across the Wells Fargo enterprise.
According to a spokeswoman, Shelley Miller, in as much as the bank is putting a ban on such cryptocurrencies for now, it affirmed that it will continue to evaluate the issue as the market evolves.
Not The Only One
Wells Fargo is not the first financial institution to impose such a prohibition. In February, Bank of America (NYSE:BAC), Citigroup (NYSE:C) and J.P. Morgan Chase (NYSE:JPM) announced they would no longer allow customers to purchase cryptocurrencies using credit cards. Just like Wells Fargo, the three attributed the ban to credit risks and cryptocurrencies’ market volatility.
Discover Financial Services has prohibited the use of its credit cards from buying cryptos since 2015. Capital One Financial is also another institution that has banned its cards from purchasing cryptos.
The banks’ assertions regarding credit risks may not be far from reality. Going by a study conducted by LendEDU last year, the claims seem to hold water. The study found out that Bitcoin investors used a credit card to fund the payments. Out of those who did, 22% were unable to pay their balances after buying the digital coins.
Bitcoin (BTC-USD) prices rallied more than 1,300% and almost hit the $20,000 price tag last year, while Bitcoin Cash (BCH-USD) topped $4,000 and ethereum (ETH-USD) reached nearly $1,400. The cryptocurrency sector has since been on a downward spiral that has been accelerating in the past few days.