Re: "When did banks get to tell their customers what they can and cannot buy?"
Off the top of my head a number of reasons:
a) These are credit card transactions, so its more a question of what are they prepared to lend against. If there has been a run up in these, they might suddenly worry that they have a large increase in lending (against which there is very dubious security)
b) There are considerable concerns about crypto currencies from a money laundering / proceeds of crime perspective (see news articles on people not being able to use profits to buy a house, etc...). Directors can go to jail if they dont try and prevent money laundering.
c) there could easily have been a spike in card related fraud - get card details, buy bitcoin, transfer to another wallet, cash out. They might have seen a big spike in claims for these.
To be clear, I dont know if any of the above are the reason, but they'd all be pretty reasonable - and with the exception of the money laundering point would also be consistent with allowing debit cards to continue.