Visa nixes Crossmint rewards loophole

Visa is moving to close a loophole used by Crossmint, a crypto payments infrastructure company, and its payment processor Checkout.com that resulted in the misclassification of meme coin purchases using credit cards via Apple Pay and Google Pay.

According to reporting by The Block, a crypto-native media company, and Crypto In America, a Substack newsletter, the purchases were being processed under the merchant category code intended for ordinary digital media, like streaming movies and audiobooks. Under Visa and Mastercard rules, cryptocurrency purchases have a unique MCC and processing requirements.

The transactions also reportedly were skirting know your customer rules that apply to all types of cryptocurrency purchases.

Visa's reported action follows an investigation by The Block into Crossmint, which employs a "token checkout" product used by consumer apps like Fomo and Robinhood Wallet. The Block reported that it made test purchases of a viral meme coin using both Visa and Mastercard credit cards on Apple Pay, which earned the cards' ordinary purchase rewards.

A matter of classification

Cryptocurrency purchases using cards are not supposed to qualify for points or cash back rewards, as they are considered akin to cash advances.

The Block reported that it was told by Crossmint that it believed it was classifying the transactions appropriately given the Securities Exchange Commission's guidance that some meme coins can be considered akin to collectibles. Visa disagreed.

In correspondence reviewed by Crypto In America Visa told an "industry participant" that the MCC used for digital media is not appropriate for meme coin purchases. Visa also has made it known to payment processors the code will no longer be accepted for those transactions after this week, according to Crypto In America.

Reporting by Crypto in America, which has been picked up by both crypto and mainstream media outlets, characterized the move by Visa as a win for big banks, like JPMorgan Chase, which are major issuers of rewards cards, and which are keen on tighter restrictions on stablecoin rewards.

Banks have been lobbying for such restrictions to be included in the Digital Asset Market Clarity Act (Clarity Act), legislation that would construct a regulatory framework for cryptocurrencies. The Clarity Act was approved by the House but has not yet been okayed by the Senate.

Notice to readers: These are archived articles. Contact information, links and other details may be out of date. We regret any inconvenience.