Starting this Friday, Barclays will block all cryptocurrency transactions made using its Barclaycard credit cards. The bank cites concerns about the financial risks associated with crypto volatility and the lack of investor protections. This move follows ongoing discussions in the UK around whether stricter rules are needed to regulate the use of credit cards for buying digital assets.
Barclays’ Reasoning Behind the Ban
Barclays has stated that the decision is intended to protect its customers from taking on unmanageable debt. Cryptocurrency prices are highly volatile, and if the value of assets drops after a credit card purchase, customers could be left with significant debt and no easy way to repay it.
In addition to volatility concerns, Barclays highlights the lack of protection for crypto-related transactions. Unlike traditional financial services, crypto purchases are not covered by the Financial Ombudsman Service or the Financial Services Compensation Scheme. If a transaction goes wrong, customers have limited recourse for recovering their money.
This policy marks a shift for Barclays, which has allowed crypto transactions via its credit cards since at least 2018. With over five million credit card accounts in the UK, this change could impact a large number of users.
FCA’s Role and the Wider Debate
Barclays’ decision arrives at a time when the UK’s Financial Conduct Authority (FCA) is considering broader restrictions on crypto-related credit card use. On May 2, the FCA released a discussion paper asking for public input on whether credit card purchases of cryptocurrencies should be restricted or banned entirely.
The regulator’s concern is that crypto behaves like other high-risk activities, such as gambling, and that buying it with borrowed money could lead to financial harm for consumers. While the FCA has not yet imposed any rules, the paper indicates that regulation could be coming.
Barclays’ proactive ban may reflect the growing pressure on banks to act ahead of regulatory changes, or it could be part of a broader strategy to reduce risk exposure in uncertain markets.
Industry Response from the Payments Association
The Payments Association, a UK-based industry body, has publicly opposed the idea of banning credit card purchases of crypto. In its response to the FCA’s paper, the group warned against equating crypto with gambling and argued for consumer empowerment over restrictions.
According to the Payments Association, existing credit controls are already in place to manage risk. They believe that consumers should be trusted to make informed choices within reasonable credit limits, rather than being blocked from using their credit cards altogether.
The association also pointed out that in some cases, banks already prevent customers from using cash to purchase digital assets, making credit cards the only remaining option. Banning credit card use, they argue, could leave consumers with fewer choices and more frustration.
What Consumers Should Keep in Mind
For those in the UK who invest in crypto, this change means they’ll no longer be able to use Barclays credit cards to fund their purchases. Other payment options, like debit cards and bank transfers, remain unaffected for now.
It’s also important to note that some banks treat crypto credit card transactions as cash advances, which can come with higher interest rates and additional fees. Buyers should always check with their financial institution before making any crypto-related purchases with credit.
More banks may follow Barclays’ lead, especially if the FCA decides to introduce stricter regulations in the future.
Barclays’ decision to ban crypto purchases via credit cards signals a growing shift in the UK financial sector’s approach to digital assets. While the move is aimed at protecting consumers from financial risk, it also raises questions about regulation, consumer rights, and financial freedom.
