Financial services giant Wells Fargo has banned its customers from purchasing cryptocurrency on credit cards, following similar moves earlier in the year by JP Morgan, Citigroup and Bank of America. Wells Fargo is the world’s second largest bank by market capitalization, and has nearly 6000 branches across the USA. A spokesman offered reassurances, however, saying that the bank “will continue to evaluate the decision as the market evolves.”
The Wells Fargo announcement comes after a tumultuous few days in cryptocurrency markets, with Bitcoin shedding over 15% and combined market capitalization languishing at just $270 billion, with no sign of markets stabilising just yet. At time of writing Bitcoin has lost over 50% since its all-time-high.
It appears there may be good empirical justification for concern on the part of lenders. A major 2017 study found that some 18% of Bitcoin investors had acquired the digital currency on a credit card, with nearly a quarter of that total being unable to repay the credit due to a drop in crypto prices. Banks are understandably dubious about lending out money their customers can’t repay.
Nonetheless services are emerging which enable those with the nerves to play for higher stakes to risk considerably more than the shirt off their back. Bitmex is just one of a number of exchanges now offering 100x leverage on crypto trading. The Wells Fargo ban may protect the bank and its customers, but the wild west world of crypto shows no sign being tamed just yet.
