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Nachiket Kelkar
Nachiket Kelkar

CRYPTOCURRENCY

Buying cryptocurrencies via credit, debit cards becoming more difficult

FILES-US-ATTACKS-IS-FINANCE-BITCOIN CitiBank has become the latest big bank to ban use of credit and debit cards for buying bitcoins and other cryptocurrencies | AFP

Citibank has become the latest big bank to ban use of credit and debit cards for buying bitcoins and other cryptocurrencies. Citibank's move comes just days after others like Lloyds, JP Morgan among others had issued similar directions.

Card users of Citibank India were sent a message by the bank notifying the changes on Tuesday. The bank cited recent Reserve Bank of India directive on cryptocurrencies and other security risks behind its move.

"Given concerns, both globally and locally, including from the RBI, cautioning members of the public regarding the potential economic, financial, operational, legal, customer protection and security related risks associated in dealing with bitcoins, cryptocurrencies and virtual currencies, Citi India has decided to not permit usage of its credit and debit cards towards purchase or trading of such bitcoins, cryptocurrencies and virtual currencies," it said.

RBI has been cautioning users and traders from time to time of the potential risks associated in dealing with cryptocurrencies. In its latest statement issued in December 2017, the central bank had also raised concerns over the significant spurt in valuations of many virtual currencies and rapid growth in initial coin offerings.

"It has not given any licence/authorisation to any entity/company to operate such schemes or deal with bitcoin or any virtual currency," RBI said.

In the Budget this year, Finance Minister Arun Jaitley reiterated the government's earlier stand that it was not a legal tender in India and went a step ahead in stating steps would be taken to eliminate it.

"The government does not consider cryptocurrencies legal tender and will take all measures to eliminate use of these cryptoassets in financing illegitimate activities or as part of the payment system," he had said.

Recently, a few large Indian banks had also suspended bank accounts of major cryptocurrency exchanges in India and had reportedly also sought more collateral from them.

Across the world, cryptocurrency exchanges allow users make purchases via credit and debit cards. However, banks, which are keen on the underlying technology of blockchain, have shown reluctance towards cryptocurrencies, particularly after the value of bitcoins crashed.

The value of bitcoins had touched a high of $19,500 in December, but has since fallen to around $8,000 earlier this month. The worry is that cryptocurrency investors will be left with a huge debt following the crash and may not be able to pay the bills of the credit or debit cards used to purchase cryptocurrrencies.

Earlier this month, London's Lloyds Banking Group had stopped accepting credit card transactions for purchase of cryptocurrencies. JP Morgan and Bank of America too have disallowed purchase of cryptocurrencies via credit cards.

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