One of the most famous attempts to “cross” cryptocurrencies and banks was the launch of familiar Visa and MasterCard bank cards, which holders could replenish with cryptocurrencies. Such tools have become very popular among crypto players in 2017 as an easy way to convert digital currencies into fiat. But today, projects involved in the release of cryptocurrency “plastic” cards are increasingly resembling an endangered species. Shift Card, a company that has been issuing Visa cryptocurrency cards since 2015 together with Coinbase, will cease operations on April 11. What do such projects offer, and why did the demand for their financial instruments turn out to be insignificant?
Paying with banking “plastic” and replenishing it with cryptocurrencies is a seemingly impossible dream for many reasons. After all, even in the U.S., where cryptocurrencies can be freely bought, there are not so many places where they can be freely spent. Moreover, the situation with the ability to make payments to the federal budget in cryptocurrencies that is available in Ohio shows that, in reality, the U.S. government treasury is ready to accept only U.S. dollars into which Bitcoins will be converted. A similar situation is taking shape in the Canadian city of Innisfil, where the green light was also formally given to payments in cryptocurrencies.
But “accepting” cryptocurrency cards for payment in stores often means that in order to make a payment, an intermediary is needed who converts digital assets into fiat. It is hypothetically possible that payments can be made directly from the buyer’s address to the store’s address, but in this case, why do we need an intermediary in the form of a cryptocurrency card provider like Visa or MasterCard? Moreover, they also get access to cryptocurrencies since to implement instant transactions that the Bitcoin blockchain does not allow, these cryptocurrencies should be stored in a digital wallet at an intermediary with all the attendant risks.
Cards for a Specific Cryptocurrency
Be that as it may, projects of cryptocurrency debit cards exist, but in general, very imperceptibly. Greater attention could have been expected to the “failed” initiatives. On July 10, 2018, the Litecoin Foundation and Token Pay organization announced the acquisition of a 9.9% stake in the German WEG Bank. The expectations that the trio will be able to finally launch a mass card product for LTC did not materialize, as was the case with the previous venture of Charlie Lee in the form of LitePay. And the press release of the two partners is currently unavailable.
But nothing prevents users from using one of the services that provide the ability to print a Litecoin address on a plastic card, as well as to place a QR code on it for convenience. It is worth noting that in this case, cooperation with Visa and MasterCard is optional, as demonstrated by the example of Cardano cryptocurrency cards equipped with a chip and an NFC antenna for the convenience of payments. And although they will not be a “cryptocurrency plastic card” in every sense, by using such cards, users can, for example, pay in more than 33,000 retail outlets in South Korea (but the option is available only to residents).
“Features” like Those of Ordinary Debit Cards
Meanwhile, the cryptocurrency community partnership with Visa began to emerge actively through the Crypto.com project, when the MCO altcoin’s team began to test such a card. Nine months later, the number of video views on how it works gained a modest 14,000 views, and the project's native token fell by 2.5 times, despite the planned “to the moon.” Shin Reh, director of marketing for Crypto.com, focused in his study on the fact that there are people who do not have access to banking services, as well as those who “want to avoid standing in ATM lines, much less waiting on hold for a call center’s response.” But what is the difference if the owner of the Visa card from this project is still standing in an ATM line? All the “features” that are offered by projects like Crypto.com are similar to those that banks employ to “lure” users to their fiat cards: cashback, transaction limits, playing on cash withdrawal fees, and annual maintenance fees. Though some projects are actively developing referral programs, in practice, they are not very effective. The amounts paid are insignificant: on average, from $10 to $20, and their receipt is sometimes aggravated by difficult conditions, as the cardholder who purchased it on recommendation must spend, for example, $100 to buy cryptocurrency, and also pay with the card at the store at least once.
Back in 2012, They Advised Us “to Prepare for Bitcoin Debit Cards”
It is worth paying attention to the fact that quite a few cryptocurrency debit card projects do not provide the full information required by potential holders on their websites. Thus, the Crypterium roadmap ends in the second quarter of this year. At SpectroCoin, which offers cryptocurrency cards in partnership with Visa or MasterCard, the company’s news apparently ceased along with the beginning of 2019, although before that, their pause was a maximum of a month and a half.
And some projects have entirely ceased to exist. The BitPlastic site, which worked in collaboration with MasterCard, has disappeared. The resource of the startup Crypto Credit Card Ltd. does not work. BitInstant also has a broken online office. CNN wrote about the project back in 2012 under the symbolic headline “Get ready for a Bitcoin debit card,” and one of the project’s employees, Erik Voorhees, is now developing another company, ShapeShift, as its CEO.
The emergence of new companies and the disappearance of old projects are not unusual since this is the usual practice of any business environment, and the cryptocurrency market is no exception. The fact that Voorhees currently does not develop any projects to create cryptocurrency cards for Visa or MasterCard is a completely different matter. And it is no coincidence: in January 2018, information appeared that Visa stopped supporting cards of a number of cryptocurrency projects, including Bitwala, TenX, Xapo, and BitPay. But the details are essential since the talk was about the suspension of cooperation from the Visa division in Europe, Wave Crest Holdings Limited. Now there is no information about the cards on the Xapo website, but there is on others.
Instability in the Work of the Cards. Who Is to Blame?
In 2019, it also became clear that many banks were playing against cryptocurrencies. Visa and MasterCard themselves have shown that, as in the case of SWIFT, they are not 100% commercial independent organizations in their activities and pay attention, for example, to OFAC sanctions, even when it is clear that the actions of restrictive measures go beyond American jurisdiction.
It is not surprising that in such a situation of uncertainty, cryptocurrency projects will be shut down. All Visa and MasterCard ShiftCard cards expire on April 11 of the current year. We are witnessing the death of, as stated, “the first Bitcoin debit cards in the United States.” The peculiarity of the situation is that even cooperation with Coinbase, the absolutely legal and largest crypto exchange in the USA, could not keep these cards afloat. The project was launched in 2015, and the cards themselves were issued by the American credit organization Metropolitan Commercial Bank. By the way, it is this credit institution that has been issuing Crypto.com cards in the U.S. since mid-November 2018.
But this does not mean that everything stops in the market. In early April, information appeared about the launch of BitBns debit cards, but in any case, users need to carefully look at the startup. There are projects such as Coinsbank, TokenCard, Cryptopay, and BonPay. The Estonian company MinexSystems assures that its cards will be valid “in any countries recognized by the UN, even if they are under any sanctions.”
The Future of Cards: Who Needs Them Most?
Further modernization of cryptocurrency cards is real. The Lightning Network made the instant acquisition of Bitcoins possible. This means that the transition of “plastic” cards to work with the “second layer” on the blockchain can theoretically eliminate the need to provide access to their cryptocurrency to any intermediary. In addition, cryptocurrency cards can become more “credit” and get the functionality that their fiat “colleagues” already have.
The process is obviously not fast, but the main question is how much do users of cryptocurrencies want to “get attached” to some issuing banks, as well as Visa and MasterCard? As eToro analyst Mati Greenspan reminds us, “Bitcoin was designed to operate independently of banks and governments”; therefore, as the expert believes, the news that some centralized structure approved “something that a bank created” cannot significantly affect the price of this crypto coin.
In addition, as a Twitter user under the nickname The Rhythm Trader attests, the largest banks in the world regularly find themselves at the center of various financial scandals. All this does not add credibility to credit organizations, which was evident back in 2009 when Bitcoin appeared as a response to the global financial crisis triggered by the activities of the largest classical players in the financial market. And even if the Federal Reserve sometimes has difficulties that it was possible to detect during the routine checkout of the page of the technical state of the operational processes of the American central bank, the Bitcoin blockchain never went on “breaks.” According to analysts of the University of Applied Sciences Lucerne, “there are such ways of organizing a business that make a number of services offered by banks unnecessary.” So, the answer to the question regarding the tendency of whether the banking sector will “move” to the blockchain and cryptocurrencies or vice versa is obvious.