Visa to close Crossmint memecoin rewards loophole following The Block investigation: report

Visa is moving to stop crypto payment processors from categorizing memecoin purchases under a "digital media" category, which allowed users to buy memecoins with credit cards and earn ordinary points or cash back on the purchases, per a Friday report from the newsletter Crypto in America. 

The move follows The Block's Sep. 1 investigation into Crossmint, the firm powering such transactions for the popular apps Fomo and Robinhood Wallet, and its payment processor Checkout.com, which was told directly that the category is no longer appropriate for memecoin purchases, per the report. 

Crossmint's memecoin checkout remains available on both apps as of publication time per The Block's review. Crypto in America reported that Visa has given the processors a grace period expected to end next week, after which the purchases will need to be processed as typical cryptocurrency transactions subject to Visa's restrictions. 

The Block's investigation found that memecoin purchases on the apps were categorized under the merchant category code (MCC) 5815, typically intended for digital media purchases like streaming movies or audiobooks, and lacked special flags that indicate the transactions involved crypto assets.

Crossmint told The Block that it believed the category was appropriate given the SEC's guidance that some memecoins can be considered akin to collectibles in a securities context, though payments experts told The Block that the SEC's opinions do not typically determine how purchases should be categorized under card-network classification rules. 

Chase told The Block at the time that it believed the category was inappropriate for the memecoin purchases and referred the matter to Visa. New York Attorney General Letitia James' office also told The Block that it was aware of Crossmint's product and was looking into the matter.

Some tokens that Crossmint was offering through its Token Checkout product also appeared to stretch the boundaries of being "memecoins" under Crossmint's own guidance, such as Genius Terminal's GENIUS, the native token of a non-custodial trading platform that has no apparent origin as an internet meme or cultural trend. GENIUS and another token, DEGEN, were made unavailable to buy through Crossmint's Apple Pay checkout after The Block asked the firm about its classification of those tokens. 

"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 in an interview for the original report. 

Mastercard, meanwhile, has not publicly disclosed whether it has issued similar instructions to payment processing firms. Mastercard, Crossmint, and Checkout.com did not immediately respond to requests for comment from The Block. Visa declined to comment on an earlier inquiry from The Block asking if the payments giant planned to restrict the use of the digital media category for memecoin purchases.