Update: This article has been updated with a statement from VISA and an indication that VISA issuers have changed pricing. The company says its approach to cryptocurrency transactions has not changed.
Sometime Last Week Bitcoin Investors are beginning to notice additional fees on their bank statements. It turns out that the issuers of VISA and Mastercard have decided (how convenient!) to reclassify the way that bitcoin and other cryptocurrency purchases are processed on their networks. Incidents like these pose many challenges to the crypto industry in the short term, but they also show how frightened the already established companies are.
Currently, if you want to buy bitcoin, ethereum, or any other altcoin instantly, the only option is to use your debit or credit card. Transferring money from your bank has lower fees, but takes several days. Coinbase has long accepted debit and credit cards for instant purchases, however, it does pass on the standard 4 percent credit card transaction fee to the buyer.
Now, it appears that VISA and Mastercard issuers have quietly reclassified the way Coinbase credit card purchases are processed on their networks. Coinbase (and presumably all other exchanges too) transactions are now categorized as ‘cash advance’ rather than ‘purchase’. Fees will vary by institution, but what this means is that using a credit card will result in Additional 5 percent fee It’s overtaken by your credit card merchant, as well as the 4 percent credit card transaction fee already passed on by Coinbase.
Even worse, cash advances do not fall within the standard interest-free grace period that consumers expect for other credit card purchases. The moment a Coinbase purchase is made, the transaction accumulates and doubles daily. If that wasn’t bad enough, the interest rate is also higher for cash advances – a staggering 25.99% in one case. Finally, but just as important to some consumers, These purchases are no longer eligible to earn credit card points.
For example, an instant $5,000 Bitcoin purchase on Coinbase with a VISA or Mastercard credit card will now result in approximately $500 in fees + interest as well. For most people, losing 10 percent of your investment in fees means that the practice of using a credit card to purchase cryptocurrency is effectively over. It will become difficult for investors to buy bitcoin and other cryptocurrencies on their own terms. Transferring funds via ACH takes three to five business days. In a world where cryptocurrency prices can swing wildly in either direction, the week feels like a cruel eternity.
In an email to all customers last night, Coinbase confirmed the change, claiming “the The MCC code for cryptocurrency purchases has been changed by a number of major credit card networks” and will now allow banks and card issuers to charge an “additional cash advance fee.” When asked for comment, a Mastercard spokesperson said:Over the past few weeks, we have shown buyers – or the merchant’s bank – the appropriate token for the transaction or merchant class to use for this type of transaction (cryptocurrency purchases). This provides a consistent view of such purchases for both traders and exporters. “
If anything, this change only makes things more complicated in the short term. Authorities are already divided over what bitcoin is “currency”: the IRS has already said that bitcoin is not a “currency” and treats it as taxable property, however, credit card companies are now telling us that buying bitcoin is the same as withdrawing cash from ATMs automated.
Both things cannot be true. By rebranding Coinbase (and presumably all other exchanges as well), VISA and Mastercard are doing their best to make investing in cryptocurrency harder, slower and more expensive. Credit card companies believe it is in their best interest to shell out millions of additional revenue in exchange for slowing the bitcoin investment rush. In many ways, this is true. The rise of bitcoin and future cryptocurrencies is linked to the eventual downfall of financial intermediaries such as Visa and MasterCard. Maybe they just woke up.
“Visa allows the use of credit and debit cards and some prepaid Visa products to purchase cryptocurrency, provided that such transactions are legal in both buyer and seller jurisdictions. It is the responsibility of merchants and acquirers to ensure that all Visa transactions are properly encrypted in the Visa payment system, so that issuers can Rely on accurate and consistent coding when making authorization decisions. These codes have been in place for some time. “Issuers make authorization decisions and set cardholder fees, if any,” Visa said in a belated statement.