What losses may a payment institution bear when a chargeback occurs after a card purchase of crypto?

Short answer

It may lose the value corresponding to the crypto assets already delivered, and may also bear dispute-handling fees, occupied security deposits and additional operational costs. Who ultimately bears the loss depends on the reason for the chargeback, the card network rules and the contract. On-chain irreversibility, passing 3DS or including a statement that no refunds will be made does not mean that card funds can never be clawed back.

Cross-border finance and crypto paymentsMerchant receipt and cross-border payments

First, distinguish the reasons for the chargeback

A user's denial of having made the payment, duplicate charges, incorrect amounts, failure to deliver as agreed, and a promise to refund that was not honored are distinct issues. Visa's merchant dispute guide classifies disputes into multiple categories and requires evidence to be submitted according to the specific reason and applicable handling rules. Upon receiving a chargeback notice, the first step should be to confirm the reason, the transaction status and the response deadline, rather than issuing a uniform reply that "the assets are already on-chain, so the chargeback is not accepted."

3DS addresses only part of the authentication risk

Visa's explanation of 3-D Secure indicates that fraud-related dispute protection depends on conditions such as how the transaction was processed and the required authentication data. Successful authentication does not mean that the goods or assets have been correctly delivered, nor does it automatically cover other disputes such as duplicate charges or incorrect amounts. Whether the specific protection applies should be determined by the acquirer based on the transaction records and the applicable rules.

Assume a coin purchase transaction completed identity verification, but the platform charged the user twice due to an error in its retry logic. Even if both charges have authentication records, the duplicate charge cannot be denied solely on the basis that "3DS was passed." Conversely, where the assets were indeed delivered to the address confirmed by the user, the wallet address, on-chain transaction records and order information can serve as useful evidence, but their probative value still depends on the type of dispute.

The loss is not limited to a single reversed principal amount

Projects should calculate the losses that cannot be recovered after asset delivery, as well as contractual processing fees, rolling reserves, delayed settlement and labor costs. If an upstream party first deducts the amount from the platform's settlement funds, the platform may need to top up cash first, even if it can later seek recovery from the merchant or the user. The existence of a right of recovery and the actual recovery of funds are two different matters.

Who ultimately bears the loss must be checked layer by layer along the contracts: who the merchant is, who signed the acquiring agreement, whether the platform has undertaken to backstop losses, in what circumstances deposits may be deducted, and what surviving obligations remain after the contract is terminated. This article does not provide a uniform reserve ratio or chargeback deadline, because these vary with transaction type, region, rules and contracts.

Evidence should be generated at the time of payment, not reconstructed after a dispute arises

It is advisable to link order confirmations, authentication results, charge and clearing records, the address confirmed by the user, asset delivery and refund status to the same transaction number, and to retain necessary materials in accordance with data protection requirements. After receiving a dispute, first rule out duplicate compensation caused by an already-issued refund, and then submit materials according to the reason. Risk management should also fix the root causes, such as duplicate requests, easily misidentified billing descriptors or customer service delays, and should not rely solely on case-by-case appeals.

Recommended actions

Establish an evidence checklist by dispute reason and a handling process for after notification by the acquirer.
Verify the 3DS protection conditions and confirm that authentication data is transmitted completely.
Assess asset losses, dispute costs and reserve occupation, rather than looking only at fee income.
Review the deduction, recovery and post-termination liability provisions in acquiring, merchant and platform contracts.

Information note: This article provides general information and does not replace legal advice based on specific facts.