It’s hard finding a reliable way to spend your cryptocurrency. When BTC’s fees went sky high in 2017, many merchants were sent scurrying from the crypto arena and have yet to return. With the Lightning Network permanently six months away, and few established crypto payment gateways, crypto debit cards have become a popular means of converting to fiat. But due to the complexities of operating a crypto-fiat business while satisfying regulatory requirements, coupled with the whims of payment giants Visa and Mastercard, crypto debit card companies find themselves in a precarious profession.
The Trials and Tribulations of Crypto-Fiat Exchange
Getting fiat money out of crypto is a lot harder than getting it in. In the past year, crypto debit cards have become an immensely valuable bridge between the fiat and crypto worlds. The two financial realms – legacy and future finance; centralized and decentralized money; fiat and cryptocurrency – don’t always sit well together. Crypto debit cards such as those offered by Bitpay, Wirex, and Revolut are routinely relied on by tens of thousands of cryptocurrency users for quick access to fiat. The cards score poorly for privacy but are highly convenient.
As the holders of several crypto debit cards have discovered over the last 12 months, however, their issuers tread a regulatory tightrope. The agreements that crypto debit card companies have with payment processors are prone to being revoked at a moment’s notice, leaving businesses and their card-holders out in the cold. News.Bitcoin.com spoke to two crypto card companies, Wirex and Revolut, as well as point-of-sale service Paytomat, about the challenges faced when operating a crypto-fiat business.
Winning Over the ‘BINs’
Wirex CEO Pavel Matveev began: “Blockchains are geographically borderless and can be accessed from any country. However, a crypto card is different and much more complicated, existing across numerous geographies and regulatory regimes. There are several challenges when trying to launch a crypto supported card in every country.” According to Matveev, these include the obligation for “the entity issuing the card and accounts to be licensed by the appropriate local regulator as an e-money/money transmitter institution or the local regulatory equivalent.”
The Wirex CEO also explained the need for a “BIN sponsor” which refers to the company that possesses membership of a card payment network such as Visa or Mastercard. He revealed: “Several BIN sponsors were hesitant to work with Wirex at first when they learned that part of our model encompasses cryptocurrencies.” Since then, however, Matveev says that BIN sponsors have become more receptive to crypto.
True Crypto Spending or Just an Illusion?
News.Bitcoin.com also spoke to Paytomat, a crypto payment solution for merchants. The project, which is gearing up for an IEO on Exmo exchange, allows more than 18 cryptocurrencies to be spent online and in-store including BCH, ETH, ZEN, and BTC. The Paytomat team discussed the challenges of working in nine countries, which entails being cognizant of the regulations governing nations as diverse as Venezuela and South Korea, explaining:
Education is still a major part of driving merchant adoption of cryptocurrencies. Once vendors can see how easy it is to integrate crypto into their existing merchant systems, without the need for additional hardware, they’re impressed. This will take time, but acceptance of cryptocurrencies at the point of sale is growing.
Purists will argue that unless cryptocurrency is directly spent at the point of purchase, it doesn’t constitute a ‘true’ crypto purchase. This reasoning would rule out crypto debit cards, which oblige the user to exchange a lump sum of cryptocurrency for fiat and then use the debit card like a preloaded credit card. Regardless of how true crypto debit cards are to Satoshi’s original intentions, however, they remain the easiest way to spend cryptocurrency for now.
The Rocky Road to Crypto Adoption
“Our goal is to be available in every country legally possible,” asserted Wirex CEO Pavel Matveev. “However, the process is extremely time consuming and requires significant human and financial resources,” he conceded. “We are therefore taking a step-by-step approach and scaling at a sensible pace. Those now entering the market and intend to provide a crypto supported debit card will take time to catch up. The demands on human resources, processes, procedures and partners to support those are significant; most notably the dedication and complexity to comply with current regulatory requirements.”
Matveev’s assessment of the dangers facing new crypto card companies is accurate, for while some projects are taking a leap forward in the industry, others have stepped back. Mexico-based Polispay has been forced to cancel its Mastercard cryptocurrency debit card for users outside of the Latin American country. It joins a string of crypto card projects that have been denied admittance to the fiat world.
Curiously, Eastern European projects appear to have made some of the greatest strides in advancing cryptocurrency merchant acceptance. The London-based Wirex and Revolut both have strong Russian contingents, while Paytomat is based in Estonia’s capital Tallinn. Vlad Yatsenko, Revolut’s co-founder and CTO, opined to news.Bitcoin.com that “isolation from the existing financial ecosystem” remains the biggest impediment to wider adoption and acceptance. When asked for his thoughts on the long-term viability of crypto debit cards as a means to drive cryptocurrency acceptance, Yatsenko ventured: “If crypto preserves its current status as a store of value, then crypto cards will still have some value as a bridge between crypto and fiat currencies.”
The Revolut CTO also highlighted a strong incentive for all cryptocurrency supporters to push for wider merchant adoption: “Bitcoin won’t be mainstream until people can freely buy goods and services with crypto … so full buy-in from merchants” is essential because “regulation/governments will follow if there is a proven economical use case” for cryptocurrency. Merchant adoption of bitcoin has notably fallen in the last two years, with Twitch and Streamlabs the latest businesses to have stopped accepting crypto payments.
Crypto debit card companies remain an endangered species, with only a handful of established players flying the flag for cryptocurrency spending. If they, together with point of sale solutions like Paytomat can not only survive, but thrive, cryptocurrencies will remain viable as a medium of exchange.
Do you use a crypto debit card service, or have you had a crypto card canceled in the past? Let us know in the comments section below.
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