Visa is moving to stop payment processors from routing memecoin purchases through a merchant code reserved for digital media, closing a channel that let cardholders earn ordinary rewards on crypto buys. Crypto in America reported the shift on Friday, following a September 1 investigation by The Block into processor Crossmint and Checkout.com.
Merchant category codes are four-digit numbers attached to every merchant that accepts cards. Payment processors assign them, and networks like Visa use them to route transactions, apply interchange rules and enforce category-level policies. Because the code travels with the transaction, an issuer never sees what was actually bought, only the label the merchant carried. The entire rewards decision happens downstream of that label.
The Block found that memecoin purchases made on the Fomo app and Robinhood Wallet were coded under merchant category code 5815, the slot used for streaming films, e-books and audiobooks. The transactions carried no flags marking them as crypto assets, so they looked to the network like routine media spending.
That mislabeling paid off for buyers. Credit card reward programs normally exclude cryptocurrency purchases, and many banks decline them outright. Purchases coded as media earned standard points and cash back, the same treatment a streaming subscription would get. The rewards were real money: points redeemable for travel, cash back credited monthly, all on purchases that compliant crypto rails would never have rewarded.
How the loophole worked
Crossmint handles secondary sales of memecoins that issuers classify as collectibles rather than securities. The platform integrated with Robinhood Wallet and with Fomo, a trading app popular with memecoin users. When a customer bought a memecoin through either app with a Visa card, the transaction reached the payment network labeled as a digital goods purchase.
Crypto in America said Friday it reviewed letters showing Visa told at least one industry participant that the digital media category was not appropriate for memecoin purchases. Checkout.com, the processor behind Crossmint’s card flows, was informed the coding would no longer be accepted.
The letters suggest the network decided the category, not the merchandise, was the problem. Visa did not announce the change publicly. It moved through processor notices, the standard way card networks enforce coding rules, with a quiet correction rather than a press release.
Visa granted processors a grace period to reclassify the transactions, expected to end next week. After that, memecoin purchases must be processed as cryptocurrency transactions. Those fall under the network’s restrictions on digital asset buying, and they no longer qualify for standard card rewards.
The collectibles argument
Crossmint told The Block it believed the media category was appropriate, pointing to SEC guidance that some memecoins can be treated as akin to collectibles in a securities context. Payments experts rejected the reasoning. Card network classification rules do not take their cues from SEC opinions, they said, and a token bought for speculation is not an audiobook.
The distinction matters because the code determines the treatment before any human reviews the charge. A purchase coded as travel earns miles. A purchase coded as crypto can be declined, capped or stripped of points, depending on the issuer.
Banks pushed first
Reporting around the episode describes a major bank flagging the discrepancy to Visa before the network acted. A review confirmed at least one transaction had been incorrectly categorized, and the network began notifying processors. JPMorgan was among the issuers that raised the mismatch, according to reports that followed the original investigation.
Issuers have their own exposure in these arrangements. When a cardholder earns rewards on a purchase the bank believed was banned, the bank eats the cost and carries the compliance question. Several issuers treat any crypto-coded transaction as a decline. The coded-as-media route bypassed those screens entirely, which is why the banks cared enough to escalate.
The episode also landed in a sensitive stretch for card networks and crypto. Stablecoin issuers are courting Visa and Mastercard for settlement partnerships, and both networks have built tokenization pilots. A rewards loophole on memecoins, publicized mid-courting, gave the networks a reason to tighten rather than loosen the border between card spending and token buying.
What changes for buyers
Once the grace period ends, buying memecoins through the affected apps becomes less attractive. Buyers lose the rewards incentive and inherit the restrictions that come with crypto-coded purchases, which some banks block and most reward programs exclude.
The reclassification could also thin volume on apps that built their appeal on frictionless card onboarding. Fomo positioned a memecoin trade as just another purchase. Users who want the same assets through compliant channels can still use exchanges, but card funding there comes with its own limits and declines.
A classification problem that outlives the loophole
The underlying question has not gone away: what merchant code fits a speculative token that regulators decline to call a security? SEC staff have suggested some memecoins resemble collectibles. Card networks classify by merchant behavior, not by legal theory. Payments lawyers told The Block the two systems do not talk to each other, and Crossmint’s bet that they did was the mistake.
Similar gaps have appeared before. Early bitcoin exchanges were coded as everything from software vendors to consulting firms because no crypto category existed. The networks eventually wrote dedicated codes, and issuers learned to treat them with suspicion. Memecoins briefly escaped that net by riding a category written for entertainment, and the escape lasted about as long as it took a reporter to notice.
For Visa, the fix closes a reputational sore rather than a revenue line. The network’s rules already restricted crypto purchases. The loophole existed because a processor and its merchants mapped speculative tokens onto a category written for entertainment, and the transactions kept flowing until a reporter asked why.