Memecoins Bought on a Credit Card, Coded as Digital Media

Buying memecoins with a credit card through Robinhood Wallet and the Fomo app appears to route around the card networks' rules on crypto purchases, The Block reported after running test transactions. The purchases were coded as digital media rather than as cryptocurrency, and the cardholder earned rewards points on them.

What a merchant category code does

Every card transaction carries a merchant category code, a four-digit classification that tells the issuing bank what kind of business it is paying. Codes drive a lot of downstream behaviour: whether a purchase is treated as a cash advance, whether it earns rewards, and whether an issuer blocks it outright. Card networks and many banks treat cryptocurrency purchases as quasi-cash, which typically means higher fees, no points, and in some cases a hard decline.

A purchase classified as digital media sits in an entirely different bucket, the one that covers apps, games and in-app content. It attracts ordinary purchase treatment and ordinary rewards. The Block's test transactions landed in that bucket, according to its report.

Why this is a live question and not a technicality

The distinction between buying a token and buying an in-app item is not obvious from the payment rails' point of view, and it is becoming less obvious as consumer crypto apps look and behave like consumer media apps. The volume on Robinhood Chain is not trivial: DefiLlama records $1.67bn of decentralised exchange volume on the network over 24 hours, and The Defiant has reported that memecoin launchpad fees are the largest single revenue source on the chain.

Credit-funded speculation is exactly the behaviour the quasi-cash treatment exists to discourage, and the concern is not a hypothetical one for issuers who bear the credit risk on a card balance used to buy a token that can go to zero in an afternoon.

What happens next is a decision by other parties

Nothing here has been ruled on. The card networks set the rules and the acquiring banks assign the codes, and neither has said publicly how these transactions came to be classified the way they were. The available fact is what The Block observed on its own test purchases.

The remedy, if the networks decide there is one, is unglamorous and quick: reclassify the merchant, and the rewards and the acceptance both change on the next transaction. That has happened before to payment processors serving crypto merchants.

What to watch

Watch for a public statement from a card network or a change in how these purchases post on a statement. If the coding stays as it is, expect the question to be raised somewhere it has to be answered in writing, because a rewards-earning credit line pointed at a memecoin launchpad is a story that tends to find a regulator.