In a sign that mainstream financial institutions are attempting to push back against acceptance of cryptocurrencies, Coinbase has publicized changes that have been made by credit card companies to purchases of cryptocurrencies with credit cards. Rather than being able to process those transactions as credit card purchases, Coinbase and other exchanges are being required by credit card companies to process those purchases as cash advances. That makes them subject to additional fees and interest charged by credit card companies.
Other credit card companies, such as Capital One, have even gone so far as to ban their customers from using credit cards to purchase cryptocurrencies. And other major financial institutions such as Bank of America and Citi are placing heightened scrutiny on credit card purchases of cryptocurrencies, which could eventually result in further restrictions or even an outright ban.
These restrictions obviously make it far more difficult for consumers to purchase cryptocurrencies, as not everyone has a huge pile of money sitting in a bank account waiting to buy Bitcoin. Any further restrictions on the part of credit card companies could do harm to Bitcoin and other cryptocurrencies by decreasing the number of people who are able to purchase cryptocurrencies.
This is where it would be helpful for regulators or legislators to step in and reassure financial institutions that cryptocurrency markets are perfectly legitimate, as evidenced by the creation and popularity of Bitcoin futures markets. The actions taken by credit card companies are reminiscent of the actions taken by banks to shut down accounts held by gun dealers, pawn shops, etc. during the Justice Department’s Operation Choke Point. That operation, thankfully, was put to an end. Now it’s time for banks and financial institutions to do some actual risk analysis rather than reflexively place restrictions on cryptocurrency transactions due to unfounded fears.
These restrictions won’t have an effect on Bitcoin IRA investors, however, since Bitcoin IRAs are largely funded with existing retirement assets. That’s one of the many advantages of a Bitcoin IRA, so that no matter how much financial institutions attempt to keep their customers from purchasing Bitcoin, investors who are serious about investing in cryptocurrencies to grow their retirement assets won’t be subject to the whims of the mainstream financial industry.