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NEWS
Cryptocurrency takes another hit as banks ban purchases on credit cards
J
P Morgan, Bank of America and Lloyds Bank have banned the purchasing of cryptocurrency via credit cards, adding to what has already been a rocky 2018 for the crypto industry.
JP Morgan CEO Jamie Dimon denounced Bitcoin last year, and has said that the bank doesn’t want to take on the risk inherent in the trading of cryptocurrency. Investors, the bank said, are exposing it to higher risks of defaults by trading in such a volatile environment.
JP Morgan’s ban came into effect soon after Bank of America’s on the morning of 2 February. Both banks are still honouring purchases made on debit cards. UK-based Lloyds Bank’s ban will apply across Lloyds Bank, Bank of Scotland, Halifax and MBNA.
As many traders set up auto-buys depending on price, the news sent a ripple through the markets. Bitcoin, and cryptocurrency in general, has seen a drastic slide in price since the turn of the year. BTC peaked at a value of $20,000 in December on some exchanges, but is now worth just $8,000.
Early in Feburary, more than $130 billion was wiped from the global cryptocurrency market in just over 24 hours, as tighter regulation and manipulation worries rocked in the industry in a short space of time.
Following a surge in value in December 2017, Bitcoin has struggled with banks and technology companies shunning it
In recent times both technology giant Microsoft and the central bank of Israel have decried the use of cryptocurrencies, mainly due to their inherent instability and perceived security risks.
Deutsche Bank execs are not fans of cryptocurrency investment, either
D
eutsche Bank Wealth Management is recommending clients steer away from any form of cryptocurrency, according to a statement by Markus Mueller, global head of the chief
investment office.
Investing in cryptos incurs risks that are just too high, including high volatility, possible price manipulation and data loss or theft, he argues. In fact, the most recent price variations cast doubt on its potential yields from other asset classes such as fixed income, he said. “It’s only for investors who invest speculatively,” Mueller said. “There is a realistic risk of total loss.”
Last month, Mueller examined in a report the potentials of cryptocurrency investments and whether they would ever replace traditional currencies. He stated that blockchain and connected cryptocurrencies are probably the inventions with the most disruptive
potential for the finance sector and the public since the invention of the internet.
He added that if cryptocurrencies were to replace money, then they would have to fulfil money’s three core functions: as a medium of exchange, a measure of value and a store of value. To do this, cryptocurrencies must be more trusted, but the risks mentioned above make this impossible.
In a different interview with Bloomberg, Peter Hooper, chief economist, said that he believes that while there is a future in Bitcoin, it can be better designed and regulation will become increasingly necessary the bigger it becomes. Hooper added that there is considerable potential, given its ability to cross borders, but it has “a long way to go to compete meaningfully with existing money supplies”.
www.ibsintelligence.com | © IBS Intelligence 2018
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