Preface

Summary: Visa is moving to close a recent payments classification loophole that allowed certain meme-coin purchases made with credit cards to be processed under a merchant code intended for digital media, thereby enabling ordinary card rewards. This article explains the background, the actors involved, regulatory responses, and the operational change processors and issuers must adopt. It aims to clarify why Visa takes issue with the classification, what short-term steps processors have been asked to take, and how cardholders and the crypto ecosystem will be affected.

Lazy bag

Key takeaway: Visa has told payment processors to stop using a "digital goods" merchant code for meme-coin purchases, requiring them instead to code such transactions as crypto purchases. That change removes the ability for those payments to earn typical credit-card rewards and gives processors a short grace period to update their flows.

Main Body

The recent episode began when an investigation revealed that some crypto checkouts powered by Crossmint, a payments infrastructure provider, allowed customers to buy meme coins with Visa and Mastercard credit cards through wallets and apps without a separate, full KYC flow. Test transactions used Apple Pay and Google Pay and were categorized as "digital goods media," a merchant classification normally applied to items such as e-books, music, or video. Because those transactions were not processed as crypto, card networks and issuers treated them like ordinary digital-media purchases, permitting the accrual of points, cash-back, or other card rewards tied to non-crypto spending.

Issuers promptly pushed back. One major bank—Chase—flagged a Visa transaction as misclassified and said it should not have earned rewards. The bank opened a dispute with Visa about the merchant category code used. At the same time, state-level authorities took notice: the New York Attorney General's office indicated it was aware of and reviewing the matter. These challenges prompted Visa to review how Crossmint-powered checkouts and other processors were coding crypto-related transactions.

In correspondence reviewed by industry sources, Visa communicated clearly that the merchant category code for "digital goods media" is not appropriate for meme-coin purchases and instructed payment processors, including parties such as Checkout.com, that they must stop using that code for these transactions. Processors were given a short grace period to wind down the practice, with the expectation that the workaround would be disabled imminently.

Crossmint defended its approach by referencing a 2025 SEC staff statement that described certain meme coins as akin to collectibles rather than securities, implying some of those tokens could be viewed differently from traditional crypto assets. Nonetheless, when it comes to payment-processing rules and issuer-reward eligibility, Visa asserted that the correct designation for meme-coin purchases is a crypto merchant code. That reclassification causes the transactions to fall under Visa’s crypto-specific rules and any card-level restrictions tied to crypto spending, which typically exclude standard rewards.

The practical impact is straightforward: meme-coin purchases via credit card will continue to be possible through supported payment methods, but they will no longer qualify for ordinary credit-card rewards once processed under the crypto merchant category. Issuers and card networks enforce differing policies on crypto rewards already—some banks restrict or decline crypto purchases by credit card entirely—so reclassification levels the playing field by ensuring consistent treatment for crypto payments across processors and issuers.

From an operational perspective, payment processors must update their merchant-category mappings and transaction routing logic so that relevant token purchases are flagged as crypto. The short grace period Visa granted is intended to give processors time to modify their software and compliance checks. Failure to comply could prompt Visa to block or decline transactions that continue to be sent under an inappropriate merchant code, or to take other enforcement measures consistent with its rules.

For cardholders who benefited from the earlier classification, the change may feel abrupt: rewards tied to points or cashback that previously applied to those purchases will likely cease. For issuers that had questioned the classification, the change reasserts control and aligns merchant coding with issuer and network policy. Regulators and attorney offices monitoring consumer protection and financial compliance may view the correction as a necessary step to prevent misleading rewards practices and to ensure clear transaction reporting.

Looking forward, this episode underscores several broader themes in the evolving intersection of payments and crypto. First, merchant-category codes and accurate transaction classification matter: small differences in coding can materially affect consumer benefits and regulatory treatment. Second, payment networks and issuers will continue to assert gatekeeping authority over how crypto commerce is treated in mainstream payment rails. Third, infrastructure providers like Crossmint that bridge traditional payments and crypto must balance innovative checkout experiences with strict adherence to network rules and issuer expectations.

Finally, while meme-coin purchases are unlikely to disappear, the convenience of earning standard card rewards on such purchases is effectively ending under Visa’s directive. Participants across the payments and crypto ecosystems should expect continued scrutiny of classification practices, and processors should proactively coordinate with card networks and issuers to ensure compliance and avoid abrupt disruption for merchants and customers.

Key Insights Table