Visa moves to curb memecoin card rewards classification after processor scrutiny

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Visa curbs memecoin rewards

Highlights

Visa will stop payment processors from classifying memecoin purchases as digital media, ending rewards on these transactions after scrutiny of Crossmint and Checkout.com.
Crossmint-powered memecoin checkouts remain active, but a grace period will expire next week, after which purchases must be processed as standard crypto transactions subject to Visa restrictions.
The New York Attorney General's office is investigating Crossmint's classification practices, while Mastercard has not stated if it will follow Visa's approach.

Processor classification change for memecoin purchases

As first reported by The Block, citing Crypto in America, Visa is moving to stop crypto payment processors from using a digital media merchant category for memecoin purchases, a setup that let cardholders earn standard points or cash back on those transactions. The change follows earlier scrutiny of Crossmint and Checkout.com over how those purchases were being coded for card-network purposes.

The issue centers on merchant category code 5815, which is generally used for digital media transactions such as streaming movies or audiobooks. The Block reported on Sept. 1 that memecoin purchases on Fomo and Robinhood Wallet were being routed under that category and did not include special indicators showing the transactions involved crypto assets.

Crossmint previously told The Block it believed the classification was appropriate in light of SEC guidance suggesting some memecoins can resemble collectibles in a securities context. Payments specialists cited by The Block said securities guidance does not usually determine how transactions should be classified under card-network rules.

Implications for processors and crypto checkout services

Crossmint-powered memecoin checkout remains available on both apps at the time of publication, but the reported grace period is expected to expire next week. After that, the purchases are expected to be processed as standard cryptocurrency transactions subject to Visa's existing restrictions.

Earlier, Chase told The Block it considered the digital media category inappropriate for these memecoin purchases and said it had referred the matter to Visa. The office of New York Attorney General Letitia James also said it was aware of Crossmint's product and was looking into the issue.

The Block also found that some tokens offered through Crossmint's Token Checkout product appeared to stretch the firm's own definition of memecoins, including Genius Terminal's GENIUS. GENIUS and DEGEN were later removed from Crossmint's Apple Pay checkout after questions about their classification, while Mastercard has not publicly disclosed whether it plans to issue similar instructions to payment processors.

Our earlier article covered the EU’s decision to hold off on a bloc-wide digital services tax while it waits for the OECD-led global framework to progress. It outlined how Brussels is weighing potential budget revenue from a digital levy against the risk of fragmented national measures and possible trade retaliation, especially from the U.S.

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