While major banking institutions recently faced a significant setback in their efforts to impose stricter limitations on stablecoin rewards following the failure of the Clarity Act to gain traction in the U.S. Senate, the financial establishment has quietly secured a more targeted victory elsewhere. Crypto In America has learned that Visa is taking decisive action to close a regulatory and operational loophole that has allowed consumers to purchase volatile meme coins using credit cards while earning traditional rewards points.
The practice, which effectively disguised high-risk cryptocurrency transactions as mundane digital media purchases, is being systematically dismantled. According to a source familiar with the matter, Visa is moving to enforce stricter coding standards on checkouts powered by Crossmint, a prominent crypto payments infrastructure firm. This intervention effectively ends a workaround that allowed users to bypass the standard restrictions typically associated with crypto-asset acquisition.
The Anatomy of the Loophole
The controversy stems from an investigative report by The Block, which uncovered that users of platforms like the Robinhood Wallet and Fomo apps were able to purchase meme coins via Apple Pay or Google Pay without undergoing the rigorous Know Your Customer (KYC) processes often required for direct digital asset exchanges. More importantly, these transactions were not being flagged by the card networks as cryptocurrency purchases.
In the test scenarios conducted by The Block, payments processed through Crossmint were coded as "digital goods media." This merchant category code (MCC) is traditionally reserved for low-risk, non-tangible assets such as e-books, music downloads, and streaming subscriptions. Because the transactions were misclassified under this banner, they escaped the typical scrutiny applied to crypto-asset purchases. Consequently, consumers were able to treat these speculative investments as ordinary retail spending, allowing them to accumulate credit card rewards, points, or cash back on what were, in reality, high-volatility meme coin acquisitions.
Banking Industry Pushback
The revelation of this practice triggered immediate concern among major lenders, who view the misclassification as both a financial and regulatory risk. JPMorgan Chase, in particular, took issue with the practice. In statements provided to The Block, Chase confirmed that at least one transaction involving a meme coin purchase was not correctly identified, noting that it had been assigned an erroneous merchant category code. The bank emphasized that such transactions should not have qualified for rewards and subsequently initiated a formal challenge with Visa to address the classification discrepancy.
The implications of this misclassification extend beyond mere rewards points. The New York Attorney General’s office has also confirmed to The Block that it is aware of the situation and is actively reviewing the matter. The interest from state regulators underscores the sensitivity surrounding the intersection of traditional payment rails and the unregulated, often highly speculative, meme coin market.
Regulatory Tensions and Industry Defense
Crossmint, the infrastructure provider at the center of the controversy, has defended its operational approach by referencing evolving guidance within the digital asset space. The firm has pointed to a 2025 SEC staff statement that characterized certain meme coins as being closer to "collectibles" than to securities. By aligning their classification strategy with this interpretation, Crossmint sought to justify the use of the "digital goods" merchant code, arguing that these assets function differently than standard investment-grade cryptocurrencies.
However, the payment processing giants appear to hold a fundamentally different view. While the regulatory landscape remains fragmented, Visa has signaled that it is no longer willing to tolerate the use of these codes for crypto-related activity. In internal correspondence reviewed by Crypto In America, Visa explicitly informed at least one industry participant that the merchant code utilized for digital goods media is inappropriate for meme coin transactions.
This directive is not merely advisory; it carries operational consequences. Sources indicate that Visa has instructed payment processors, including Checkout.com, that the "digital goods" code will no longer be accepted for these specific types of transactions. To facilitate a transition, the processors have been granted a brief grace period to wind down the practice, with the expectation that the loophole will be fully closed by next week.
The Road Ahead for Crypto Payments
The crackdown represents a broader effort by major financial institutions to exert control over how digital assets interact with traditional banking infrastructure. While the defeat of the Clarity Act in the Senate was seen by some as a reprieve for the crypto industry, the actions taken by Visa demonstrate that private card networks are increasingly taking matters into their own hands, independent of federal legislative outcomes.
Meme coins themselves are unlikely to disappear from the retail market, but the era of buying them with the convenience—and the rewards—of a standard credit card appears to be coming to an abrupt end. As payment processors align with Visa’s new stance, future purchases of these assets will inevitably need to be processed as formal cryptocurrency transactions. This will subject them to the standard rules, risk assessments, and restrictions that major card networks apply to the broader crypto ecosystem.
The shift serves as a stark warning to firms operating in the space that the "gray areas" created by creative merchant coding are shrinking. As one source familiar with the discussions noted, "The message to the crypto industry is clear: Stop being cute, stay in your lane and use the appropriate codes."
For consumers, this means the days of earning travel points or cash back on speculative meme coin bets are effectively over. For the industry, it marks a return to more traditional oversight, as the pressure mounts to bring crypto payment infrastructure into full compliance with the established protocols of the global financial system. Whether through direct regulation or the private mandates of major payment networks, the environment for retail crypto transactions is becoming significantly more rigid, prioritizing institutional risk management over the permissive flexibility that characterized the recent wave of meme coin speculation.