Lloyds Banking Group has banned credit card customers from buying Bitcoin over concerns that they could be left in debt as the cryptocurrency’s value falls.
Lloyds, which includes Halifax, MBNA and Bank of Scotland, is believed to be the first UK bank to ban credit card customers from borrowing to buy the digital currency, which has more than halved in value in recent months.
UK investors have not been slow to jump on the Bitcoin bandwagon as the crypto soared in value in 2017, hitting a $20,000 peak in December.
Warnings that Bitcoin’s appeal was more for the speculator than the currency user and that it had all the characteristics of a bubble failed to slow interest as money continued to pile in.
The picture has changed markedly of late. As news of Lloyds’s ban emerged, the value of Bitcoin was around $8,000 – in the last seven days the currency’s valuation has gone down over 28%.
A spokeswoman for the banking group said: “Across Lloyds Bank, Bank of Scotland, Halifax and MBNA, we do not accept credit card transactions involving the purchase of cryptocurrencies.”
The move follows warnings by regulators in the US, South Korea, China, Russia and India over the cryptocurrency.
Germany’s Bundesbank has also called for global regulation of Bitcoin and France’s finance minister wants tougher rules for cryptocurrencies.
Last month, Facebook said it was to block advertising promoting cryptocurrency products and services.
The social networking website, which reported ad revenues of $10bn in the third quarter, said that it was striving to block companies from advertising "financial products and services frequently associated with misleading or deceptive promotional practices".
And in Davos last month, a panel of economists and investors agreed that bitcoin was not a successful currency substitute – yet. Cecilia Skingsley, deputy governor at Sweden's Riksbank said that for money to be efficient it had to be a safe store of value - it must have price stability and there must be a majority of people that accept this.
"Bitcoin doesn't meet this criteria as it too volatile - it is an asset, not a currency," she said.