Coinbase customers having problems associated with Visa and banks

The credit card issuer Visa has been the cause of Coinbase's multiple problems with its users' cryptocoin accounts that have included reversed transactions, unauthorized withdrawals and unexplained fees.

Coinbase

Coinbase is a cryptocurrency exchange with headquarters in San Francisco, California. So far, they broker Bitcoin, Bitcoin Cash, Etherium, Litecoin and now perhaps Ripple. Coinbase operates in about 32 countries and offers bitcoin transactions and storage in 190 countries.

Coinbase issues an incorrect explanation of what happened

Last week, Coinbase said that a change in the way that credit card companies classified digital transactions was responsible for the glitches and that it had identified a solution to the problem.

Later on Friday, Coinbase claimed that it was VIsa that actually reversed many weeks' worth of transactions under what it called a new merchant category code or MCC. This code is used to classify businesses by the type of service provided and it helps determine how the Internal Revenue Service (IRS) deals with taxes for the service.

Coinbase claimed that Visa had switched to an MCC “that allows large banks and card issuers to charge consumers additional fees,” with the result that there were charges that looked erroneous.

Coinbase said that it was actively working with major card networks to devise a new MCC for purchase of digital coins that hopefully would not involve additional fees.

Visa denies any MCC changes

Visa issued a statement saying: “Visa policies with respect to the correct coding of transactions have not changed. Cryptocurrency transactions must be properly coded so that issuers can rely on accurate and consistent information when making authorization decisions. We recently sent a communication to clients to explain the existing requirements, but there were no changes or reclassifications. It is inaccurate to say Visa made recent changes to the MCC code.”

Later Visa issued another joint statement with the payments processor Worldpay that handles the transactions with Coinbase saying: “This issue was not caused by Coinbase.” It is not clear what the dispute is between Coinbase and Visa but Visa admits it is the cause not Coinbase. The statement noted that some clients may have had duplicate transactions posted to their accounts when there should have been only one.

The statement goes on to note that Worldpay and Coinbase were working with Visa and the banks to make sure the duplicate transactions were reversed and appropriate credits posted to accounts. It claimed all reversals had been issued and should appear within client's credit and debit card accounts within the next few days. The statement advises those who continue to have problems and issues related to card fees or charges to contact their card issuing bank.

SItuation still unclear

Coinbase customers complained that there funds were still being tied up by both card issuers and banks. Visa claims it is refunding, yet insists that the onus is on parties who had their accounts drained to pursue the appropriate party and determine what to do.

Neither Coinbase, Visa or some banks come out of this without some blame and it seems they are not working well together to handle cryptocurrency trading.

Examples of problems

One user claimed on Reddit to have bought Bitcoin, Ether, and Litecoin on Coinbase worth $300. A few days later the user found that his account was charged with five transactions of $300 worth $1,500 which together with fees emptied his account. The user exclaimed: “My bank account went from very comfortable to negatives balance, not to mention extra $5 charges, and overdraft fees. As a result my rent check bounced, and my bank went further into negative for a NSF charge for $25. My landlord is not a nice person and is on my CASE and I have nothing to offer him. I am FREAKING OUT.”

Pete Kingree a Coinbase client from Virgina said there were unauthorized additions to a Coinbase trade of $931 dollars plus $7.45 bank fees. He said he was writing the Coinbase CEO and the Governor of Virginia. Numerous other complaints are listed in this Verge article.

Previously published in Digital Journal

Russia to vastly increase use of Chinese credit cards

Russia is planning to vastly increase the use of China UnionPay credit cards to compete with Visa and Master Card which provide almost all credit card services in Russia at present.

Visa and MasterCard froze accounts associated with several Russian banks last March without any notice. In response to these actions Russian President Putin signed a law that would create a national payment system and also allow a security fee of up to 10 percent of a foreign companies' daily turnover.This would be to compensate banks for any service disruption. The law takes effect on January 1 next year. The percentage is much lower than the original 25 percent contemplated at first. The concession was made at the St. Petersburg International Economic Forum. Even so Visa said it did not rule out leaving the Russian market as it found the security deposit demand unacceptable. 

  China's UnionPay could easily replace Visa if it departs. The company hopes to have 2 million cards in Russia within three years. Although UnionPay emerged in China only in 2002 as a domestic alternative to Visa and MasterCard it is now number one in terms of the number of cards issued in the world. Since then UnionPay has had a huge international expansion: Now UnionPay cards can be used in 141 countries and regions around the world (second-largest payment network by value of transactions processed, behind Visa.). Some UnionPay Credit Cards are also affiliated with either American Express, MasterCard or Visa, and they can be used abroad as an American Express, MasterCard or Visa. UnionPay Debit Cards, however, can only be used in the UnionPay network and other networks that have signed contracts with UnionPay. Since 2006, China UnionPay cards can be used in over 100 countries outside China.[5]  

Russia's biggest banks are already making technical preparations for use of the UnionPay cards and running tests on them. Denis Fonov, Deputy Chairman at LightBank(LaitBank) a small bank based in Moscow said; “Visa and MasterCard have 100 percent trust, but right now, there is no trust in the system, and many, even our clients, have shifted their transactions from American dollar and Euro to Yuan. They are eager to receive this card- we already have a big list of people waiting to get this card instead of MasterCard and Visa,” LightBank has been working with UnionPay for some time and had ordered 10,000 cards for its clients already. There are already 20,000 cards in Russia and another 100,000 are planned for September. LightBank reportedly is to issue 10,000 cards next week. 

UnionPay claims to have about 30 partner banks in Russia. While many large Russia banks are planning to begin issuing the UnionPay cards the huge Sberbank is planning to concentrate on developing the Russian "Pro 100" payment system. UnionPay will be required to pay a security deposit at the same rate as Mastercard and Visa.

 Russia is also seeking to become less dependent on dollars and Euros by increasing its gold stock. At the end of July it held gold stocks worth $45 billion. Yaroslav Lissovolik, chief economist at the Deutsche Bank in Moscow said: "The fact that Russia has intensified its diversification process reflects the fact that a fairly high proportion of reserves were held in dollars and euros, while the share of gold was low,” In the first half of this year Russia has reduced its foreign currency reserves by 2.5 per cent. It is also buying Chinese yuan, and the Japanese yen rather than US dollars and Euros. I wonder if a US PR firm produced the enclosed promotional video for UnionPay.