Robinhood Wallet and Fomo let users buy memecoins with credit cards, bypassing crypto rules

Users can now buy memecoins like dogwifhat (WIF) with credit cards on Robinhood Wallet and Fomo, a social trading app, without completing identity checks. The purchases are processed through Apple Pay or Google Pay and are classified as digital goods rather than cryptocurrency, allowing them to earn standard credit card rewards.

How the purchases work

Tests by The Block showed that memecoin purchases made with Visa and Mastercard credit cards were labeled as “digital goods media,” a category that includes items like audiobooks and digital movies. The transactions are powered by Crossmint, a crypto infrastructure firm, and do not require know-your-customer (KYC) verification. Crossmint states its product includes anti-money laundering monitoring.

Fomo and Robinhood Wallet users can select a memecoin, check out with Apple Pay or Google Pay, and receive the tokens directly in their app wallets. Over 68,000 first-time crypto buyers have used this method on Fomo since April.

Dispute over transaction coding

Visa and Mastercard require cryptocurrency purchases to use specific merchant category codes (MCC 6012 or 6051) and carry flags indicating crypto involvement. However, these memecoin transactions used MCC 5815, which covers digital goods like books and movies. Chase, the issuer of one test card, told The Block it believed the code was incorrect and opened a case with Visa. The bank also noted that crypto purchases are ineligible for rewards under its program.

Crossmint maintains the classification is appropriate, citing the SEC’s view that some memecoins can be considered collectibles. A Mastercard spokesperson declined to endorse or reject the approach but stated the company works with partners to improve compliance.

The New York Attorney General’s office is aware of and reviewing the matter.

Why this matters

Card network rules typically block crypto purchases from earning rewards and require special coding. By classifying memecoins as digital goods, these transactions may bypass those restrictions, raising questions about compliance with payment network policies.

Sources

• The Block