Bloomberg: HSBC and Nationwide prohibit UK customers from purchasing cryptocurrency through credit card

It is reported that according to a Bloomberg message, HSBC and Nationwide Building Society have strengthened restrictions on UK retail customers’ access to encrypted assets. Nationwide Building Society has informed customers that Nationwide’s daily limit for the purchase of encrypted assets by debit card is 5000 pounds (5965 dollars), and its credit card can no longer be used to purchase encrypted assets. HSBC said that from last month, it banned customers from purchasing cryptocurrency through its credit card. HSBC said in an email statement: “This is because customers may face risks”. Both banks mentioned the warning issued by the Financial Conduct Authority, which has listed cryptocurrency as high-risk for many years.

Interpretation of this information:

The message reports that two major banks in the UK, HSBC and Nationwide Building Society, have introduced stronger restrictions on retail customers’ access to encrypted or cryptocurrency assets. According to the report, Nationwide has imposed a daily limit of £5000 for the purchase of encrypted assets via debit card and has discontinued the use of credit cards for such transactions altogether. Similarly, HSBC has banned its customers from using credit cards to buy cryptocurrencies since last month. The banks have purportedly taken these measures in response to the perceived risks associated with cryptocurrency investments and have cited the warning from the Financial Conduct Authority (FCA) regarding the same.

The message implies that the banks’ decisions to curb cryptocurrency purchases could have been prompted due to their concerns about the high degree of volatility in cryptocurrency markets. Cryptocurrencies have been known to exhibit extreme fluctuations in prices, sometimes within a matter of hours, and investors who are not well-versed with the workings of these markets may end up losing money quickly. Given that credit cards offer the option of borrowing money, the risk of accumulating debt, which cannot be paid back if investments go awry, is high. The banks may have decided to protect their customers by limiting or discontinuing credit card transactions altogether, in the interest of minimizing exposure to financial risk.

The message also suggests that the banks have taken cognizance of the warnings issued by the FCA, which considers cryptocurrencies to be high-risk financial products. The FCA has cautioned investors against putting all their money into the volatile asset class and has urged them to consider the potential risks before making any investment decisions. It is possible that the banks have decided to err on the side of caution and align their policies with the regulator’s stance on the matter.

Overall, the message suggests that HSBC and Nationwide Building Society have taken proactive steps towards protecting their customers from the potential risks arising from the purchase of cryptocurrencies. The measures implemented by the banks reflect a growing awareness of the need to regulate the highly volatile cryptocurrency markets, and investors should exercise caution before investing their money in such assets.