Visa is moving to prevent crypto payment processors from classifying memecoin purchases as “digital media” transactions, a practice that has allowed customers to buy the tokens with credit cards while earning standard points or cash back.
The change follows an investigation by The Block into Crossmint, the company behind the payment service used by the Fomo and Robinhood Wallet apps, and its payment processor Checkout.com. According to a Friday report by the Crypto in America newsletter, Visa told Checkout.com that the digital media category was no longer suitable for memecoin purchases.
Crossmint’s memecoin checkout was still available on both apps at the time of publication, according to a review by The Block. Crypto in America reported that Visa had granted payment processors a grace period expected to expire next week. After that point, the purchases are expected to be processed as conventional cryptocurrency transactions and become subject to Visa’s restrictions.
The Block found that purchases made through the apps were assigned merchant category code 5815. The code is generally used for digital media, including streamed films and audiobooks. The transactions also did not carry specific indicators showing that crypto assets were involved.
Crossmint said it considered the classification appropriate because of guidance from the SEC suggesting that some memecoins could be treated similarly to collectibles in a securities context. However, payments specialists told The Block that SEC views would not normally determine how a transaction is classified under card-network rules.
Chase said during The Block’s original investigation that it considered the category unsuitable for the purchases and had referred the issue to Visa. The office of New York Attorney General Letitia James also said it was aware of Crossmint’s product and was examining the matter.
The investigation also raised questions about whether every asset available through Crossmint’s Token Checkout product met the company’s own description of a memecoin. One example was Genius Terminal’s GENIUS, the native token of a non-custodial trading platform, which appeared to have no clear connection to an internet meme or cultural trend.
After The Block questioned Crossmint about the classification of GENIUS and another token, DEGEN, both were removed from availability through Crossmint’s Apple Pay checkout.
“Complying with regulation, especially now that we’re a regulated financial entity, is super important, but we’re always going to have a little bit of tension between the business and the law that is healthy,” Crossmint Head of Strategy Fonz Olvera told The Block.
Mastercard has not publicly said whether it has issued similar instructions to payment processors. Mastercard, Crossmint and Checkout.com did not immediately respond to The Block’s requests for comment. Visa had declined to comment on an earlier inquiry about whether it planned to restrict the use of the digital media category for memecoin purchases.
