Report: Visa moves to stop digital-media coding for memecoin purchases

Visa is moving to stop crypto payment processors from categorizing memecoin purchases under the digital media category, according to a Friday report from the Crypto in America newsletter. The classification allowed users to buy memecoins with credit cards and earn ordinary points or cash back. The move follows The Block's Sep. 1 investigation into Crossmint, which powers the transactions for Fomo and Robinhood Wallet, and its payment processor Checkout.com. The report said Checkout.com was told directly that the category was no longer appropriate for memecoin purchases. Crypto in America reported that Visa gave the processors a grace period expected to end next week. After that period, the purchases would need to be processed as typical cryptocurrency transactions subject to Visa's restrictions. Crossmint's memecoin checkout remained available on both apps at the time of The Block's review. The investigation found that the purchases used merchant category code 5815, which is typically intended for digital media such as streaming movies or audiobooks. The transactions also lacked special flags indicating that they involved crypto assets. Crossmint said the category was appropriate because SEC guidance indicates that some memecoins can be considered similar to collectibles in a securities context. Payments experts told The Block that SEC opinions do not typically determine how purchases are categorized under card-network classification rules. Chase said at the time that it considered the category inappropriate and referred the matter to Visa. The New York attorney general's office said it was aware of Crossmint's product and was looking into the matter. Some tokens offered through Crossmint's Token Checkout product appeared to stretch the boundaries of memecoins under Crossmint's own guidance. One example was Genius Terminal's GENIUS, the native token of a non-custodial trading platform with no apparent origin as an internet meme or cultural trend. GENIUS and DEGEN were later made unavailable through Crossmint's Apple Pay checkout after The Block asked Crossmint about their classification. Crossmint Head of Strategy Fonz Olvera said the company considered regulatory compliance especially important because it was a regulated financial entity, while describing tension between business and law as healthy. Mastercard has not publicly disclosed whether it issued similar instructions to payment processing firms. Mastercard, Crossmint and Checkout.com did not immediately respond to The Block's requests for comment. Visa declined to comment on an earlier inquiry about whether it planned to restrict use of the digital media category for memecoin purchases.