Visa to Close Loophole Allowing Credit Card Rewards on Meme Coin Purchases

Visa is preparing to close a loophole in its payment system that allowed users to purchase meme coins using credit cards and receive rewards or cash back, as if it were a regular digital content purchase. The move follows an investigation examining the activity of Crossmint and how it processed meme coin purchases for apps like Fomo and Robinhood Wallet.

New Restrictions on Crypto Payments

According to reports, Visa has instructed players in the payment industry to stop using the merchant category code designated for "digital media" for meme coin purchases. Processing companies have reportedly been given a transition period ending this coming week, after which such purchases will need to be processed as standard crypto transactions and be subject to Visa's restrictions on such deals.

This classification is typically used for digital media purchases, such as movies or audiobooks. According to the investigation, certain meme coin purchases through some platforms received this classification and were not flagged as crypto-related transactions. As a result, users could receive standard credit card rewards, points, or cash back, even though crypto transactions generally do not qualify for those terms.

Regulatory Implications and Market Impact

The incident illustrates the difficulty arising at the intersection between the crypto world and the traditional payment system.

Payment experts noted that SEC positions do not typically dictate how credit card companies should classify transactions under payment network rules. At this stage, it remains unclear whether Mastercard will take a similar step, as the company has not yet published whether it issued parallel instructions to payment processors.

As Visa acts to change the classification, the move may signal further tightening of the rules around using credit cards to purchase crypto assets.