February 8, 2018
The challenges for Bitcoin and other cryptocurrencies as an online payment method are mounting. According to an email obtained by Tech Crunch, Bitcoin processor Coinbase notified its customers that Mastercard and Visa have changed the way they classify purchases of virtual currencies like Bitcoin, litecoin and etherium made with credit cards to the same as cash advances. That means an extra 5-percent fee in addition to the 4 percent Coinbase and other similar Bitcoin processors charge for credit-card purchases. The email pointed the finger directly at the card networks:
“Recently, the MCC code for digital currency purchases was changed by a number of the major credit card networks,” the message said. “The new code will allow banks and card issuers to charge additional ‘cash advance’ fees. These fees are not charged or collected by Coinbase. These additional fees will show up as a separate line item on your card statement.”
According to Mastercard, the change is not actually a change but a “clarification” to acquirers so the MCC code for these types of transactions are consistent among “both merchants and issuers.”
Cryptocurrency industry observers are mostly characterizing the move as a manifestation of the card networks’ and banks’ fear of being disintermediated out of the online payment process by digital currencies. Many of the biggest issuers in the U.S., including J.P. Morgan Chase, Bank of America and Citigroup, recently decided to prohibit purchases of cryptocurrency using their cards. On the other hand, Stripe, a major online payment processor, and Microsoft, which accepts Bitcoin as payment for some of its products, also have pulled back from Bitcoin citing the volatility in its value as a detriment to using it as a payment method. So, fear of Bitcoin does not seem confined to any one stakeholder in the payments ecosystem.
In less than a year, the price of a Bitcoin has surged to nearly $20,000 before plunging to a low of less than $7,000.