2017 November 6 - Volume.1 Issue.2

Continental Monopolies Rein Cryptocurrency Visa Cards

With the rapid increase in price for Bitcoin, holders are reluctant to spend, which pushes down demand from consumers on merchants to accept the currency. Cryptocurrency debit cards provide a way to seemingly eliminate fiat currencies in adopter’s daily lives. But there is a clear chokepoint for cryptocurrency spending as only two significant Money Services Businesses issue Visa Cards ­– WaveCrest in Europe, and Metropolitan Commercial Bank in the US.


Bitcoin, along with other cryptocurrencies, are only accepted by a handful of merchants around the world and even that has been decreasing. According to a recent report by Morgan Stanley, Bitcoin is only accepted by three of the top 500 online merchants, down from five merchants last year. Overstock.com, Expedia and Newegg accept Bitcoin. Overstock reportedly generates as much as $5 million of revenue per year from Bitcoin.

Low-Spend

There are several adoption problems facing Bitcoin as a currency. With the price of Bitcoin having grown by more than 600% in 2017, holders are reluctant to spend it in the hope of further gains against the Greenback and other fiat currencies. And unlike with credit card transactions, the consumer rather than the merchant covers the transaction fees of Bitcoin payments.

Bitcoin is also dealing with scalability issues, which only deepens the problem. In the past quarter, the average transaction fee has oscillated from about $2 all the way to $9.

Most smaller transactions are currently unfeasible with Bitcoin which turns some merchants to alternative cryptocurrencies such as Litecoin or DASH. Most often, Bitcoin is being used as a store of value and as a speculation vehicle. Thus there is a lack of demand from consumers, which consequently doesn’t put pressure on merchants to invest in Bitcoin infrastructure.

For users that want to use cryptocurrencies for everyday transactions, there is an option to use one of the cryptocurrency debit cards. Cryptocurrency enthusiasts are mostly skeptical of cryptocurrency debit cards because they introduce a third party, which leads to centralization of the ecosystem. But until more merchants are willing to accept cryptocurrencies directly, there is no other option to function without fiat currencies.

All of the cards can be bought online from a company for a flat fee after fulfilling Know-Your-Client (KYC) checks and location requirements - either as virtual or plastic card. After the delivery, the card is then activated and can be loaded with funds by sending the supported cryptocurrency to the online wallet associated with the card. Most of the cards only support Bitcoin but some also support Litecoin, Ether and Dash. TokenCard is developing a debit card that will support payments with ERC20 tokens. Uquid, which is currently still running an ICO and has yet to release a card, promises to work with 90 different cryptocurrencies. Wirex and Bitwalla have ShapeShift support allowing for instant swap across multiple currencies.

Spot-Rate vs Fiat-On-Deposit

Some debit cards allow holding cryptocurrencies and only after a payment is made, the cryptocurrency is sold for the amount paid in fiat currency. Some other cards need to be loaded with cryptocurrencies, which is then immediately converted to fiat (See Table). Each company has little different but similar fees for ATM withdrawal, foreign exchange conversion and sometimes also charge a monthly service fee and a transaction fee.

EU: WaveCrest Issuer Monopoly

Currently, all the widespread debit cards are issued by Visa, none by Mastercard. Moreover, the majority of cards are issued by the same issuing company - WaveCrest Holdings Limited. WaveCrest is a prepaid access provider working under license from Visa International. The company is FinCEN-registered Money Services Business (MSB) based in Gibraltar.

Reportedly due to the new Visa regulations, WaveCrest announced in September that it will no longer issue or maintain cards outside of the European territory (EEA, Turkey, Switzerland and Israel).
It added that all the existing cards outside of the European territory will cease to function from October 15. Before this announcement, WaveCrest allowed shipping their cards globally. On the back of this announcement, already issued cryptocurrency debit cards (TenX, Xapo, Cryptopay.me, Coinsbank, Wirex, Bitwala, Shakepay, SpectroCoin and Mobi) stopped working for people outside of the European territory.

US: Metropolitan Commercial Bank Monopoly

BitPay is the only card that currently ships to both Europe and the United States because they use two different issuers - WaveCrest for Europe and Metropolitan Commercial Bank for the United States. Shift uses Metropolitan Commercial Bank as their only card issuer and their card is thus only available to the U.S. citizens.

The only cryptocurrency card that currently ships globally is WageCan Golden Card. It is unclear which card issuer WageCan uses but they charge a $162 issuance fee and also have a 2.5% ATM withdrawal fee.

Monaco, which raised $25Mn in their ICO in June, has recently announced that they reached an agreement with Wirecard AG to issue Visa cards for Singapore residents. It is currently unclear whether Monaco will also be allowed to issue cards elsewhere and if so, when.

TenX raised $80Mn in an ICO and is reportedly working to obtain a license to issue their own debit cards. Moreover, TenX announced that they are onboarding alternative card issuers who can issue cards outside of Europe with a target date of November.

It remains unclear how the other companies will overcome the current limitations by WaveCrest. And whether the new card issuers won’t also be affected by the new regulations of Visa. Currently, only customers with a residence in the European Territory and the United States have access to the reputable cryptocurrency debit cards.

Cryptocurrency Visa Card Issuers


Source: Diar Note: Europe In Table Context Includes EEA, Turkey, Switzerland and Israel.

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