Canada’s Second Largest Bank Stops Customers From Buying Cryptocurrencies With Credit Cards

  • Canada's second largest bank now stops customers from buying cryptocurrencies with credit cards
  • Other Canadian banks revealed they were considering making the same move

A global trend in which banks are banning customers from purchasing cryptocurrencies using credit cards is on the rise, and Canada’s second largest bank just joined in. According to local news outlet The Globe and Mail, the Toronto-Dominion Bank (TD) recently announced the move in a statement emailed to its customers.

TD is notably the first major Canadian bank to enact such a policy. The move comes after several major banks throughout the world, including Bank of America, JP Morgan Chase, and Citigroup in the US, and Lloyds Banking Group in the UK, started the trend. Customers in South Africa, Australia, and India face the same ban.

In an emailed statement, a TD representative implied that the bank is halting cryptocurrency purchases with credit cards as a security measure. His email read:

“At TD, we regularly evaluate our policies and security measures, in order to serve and protect our customers, as well as the bank."

Toronto-Dominion spokesperson

The Globe and Mail dug a little deeper, and found that other Canadian banks considered making a similar move, but haven’t yet done so. The Royal Bank of Canada (RBC), the country’s largest bank, revealed that it currently allows cryptocurrency purchases with credit and debit cards, in limited circumstances.

The bank, however, cautions its client against the use of cryptocurrencies, by warning them about the possibility of a sudden drop in their value. This, the bank claims, could “expose them to substantially higher debt levels than they are able to repay.”

In an email to the local news outlet, an RBC spokesperson wrote:

"We understand that regulatory and risk factors related to cryptocurrency continue to evolve and as a result, we are closely reviewing our policies with respect to cryptocurrency transactions."

Royal Bank of Canada spokesperson

The Bank of Nova Scotia, the country’s third largest bank, also revealed it was analyzing a potential ban on cryptocurrency purchases with credit cards. In an emailed statement, a spokesperson for the bank revealed that the organization understands that “regulatory and risk factors related to cryptocurrency continue to evolve,” and as such it’s reviewing its policies.

Other Canadian banks didn’t comment whether they were considering halting cryptocurrency investments with credit cards. TD’s move comes shortly after the Bank of America, the second largest bank in the US, admits cryptocurrencies are a risk to its business in its annual filing with the Securities and Exchange Commission (SEC).

Chinese Yuan 'Inversely Correlated' with Bitcoin, Amidst US-China Trade Wars

Since January 2018, China and the US have been involved in an intense trade war in which both countries have significantly increased tariffs on imported goods and services.

Due partly to the rising tension between the two countries, the Chinese yuan (CNY) has been losing value against the USD. During the same time period, the price of bitcoin (BTC) and other major cryptoassets has been surging.

As noted by the South China Morning Post (SCMP), the value of BTC, the world’s most dominant cryptocurrency, increased by 26.5% to $7,878 during the time period from May 5 to May 17. Notably, US President Donald Trump had announced on May 5 that he would further increase tariffs on goods imported from mainland China.

Chinese Yuan Weakens as Nation’s Government Responds to Increased Tariffs

The SCMP pointed out that the yuan dropped to its lowest level since the past six months after the Chinese government responded to Trump administration’s decision to impose higher tariffs on China.

Commenting on the price fluctuations of both the yuan and bitcoin, Garrick Hileman, a Macroeconomics Researcher at London School of Economics (LSE) and Head of Research at Blockchain.com, remarked:

We are observing a strong inverse correlation between the [Renminbi] RMB’s value and bitcoin, meaning that recent RMB declines over trade tensions have been closely matched by increases in the value of bitcoin.

“Correlation Does Not Necessarily Equal Causation”

Hileman also mentioned that we “cannot be 100% certain” that the bitcoin price has been increasing due to heightened concerns regarding trade tensions and the corresponding decline in the value of the yuan. The blockchain researcher stated:

Trade tensions and declines in the RMB’s exchange rate as correlation does not necessarily equal causation.

Hileman, who earned his Phd from LSE, revealed:

This is not the first time we’ve seen significant increases in the value of bitcoin taking place alongside yuan concerns.

He added that there’s “growing recognition of bitcoin as ‘digital gold’ and it being used as a hedge against various macroeconomic risks.”

“This Year, the Narrative Is Bitcoin, Bitcoin, Bitcoin”

According to the SCMP, bitcoin’s price may have surged recently due to the generally positive remarks made about it at the Consensus 2019 conference.

Meltem Demirors, the Chief Strategy Officer at CoinShares, a crypto treasury management firm, has also confirmed recently that the narrative this year has been mostly about Bitcoin. Demirors revealed that both institutions and retail investors are “feeling good” and are “more confident” about the long-term potential of Bitcoin and the evolving ecosystem that supports it.