Coinbase, the largest cryptocurrency exchange in the United States, recently acquired Principal Membership status from Visa, giving it the power to issue crypto-fiat debit cards without needing to rely on third-party institutions like WaveCrest and WageCan.
This development is a landmark for this niche of the crypto industry. It marks a breakthrough for DeFi and may well pave the way for broader adoption of cryptocurrencies by the world.
But is the world ready for crypto-fiat debit cards? Will the public embrace them and use them for everyday purchases? And more importantly, will world authorities allow crypto-fiat cards to thrive?
Why The World Needs Crypto-Fiat Debit Cards
It is obvious that the world’s current financial landscape is quite developed and advanced. Banking institutions have leveraged technological innovations like the internet to provide solutions that make it easier to send and receive money. A few centuries ago, you had to haul chunks of gold to rendezvous points to complete a business transaction. The same thing can be done nowadays with a swipe on an iPhone.
However, a large population of the world doesn’t have access to these fintech solutions. Out of the 7.7 billion people currently living on the face of the earth, 1.7 billion adults are unbanked (that’s 22%). These people can’t apply for financial instruments like credit and debit cards because of their skin color, country of origin, social class, financial status, and location. The current financial landscape imposes restrictions on who can have access to these instruments.
Then Bitcoin arrived in 2009 with blockchain technology and after a few years of skepticism and criticism, started shaking things up. Cryptocurrencies are open and borderless and are pretty much available to anyone who cares to have them. Thanks to cryptos, the unbanked can now make financial transactions without the permission of financial authorities.
Crypto-fiat debit cards help improve this experience. They make it possible for you to withdraw money from an ATM, pay for groceries and buy stuff online without having a traditional bank account. When you make a transaction, merchants get paid in their own currency while you are charged in crypto from your prepaid balance.
Developed communities also stand to benefit from crypto-fiat debit cards. For one, spending cryptocurrencies will be easier and faster because users won’t need to log into any account to make a transaction; all necessary crypto-fiat conversions are done in the background. To pay for groceries, you just swipe the card and you’re good to go.
However, crypto-fiat cards are yet to kick off in spite of the valuable services they provide. That’s why Coinbase’s landmark achievement with Visa plays a very important role in the future of this niche of the crypto industry.
Why Crypto-Fiat Debit Cards Aren’t Ubiquitous
There are several crypto-fiat debit cards in operation presently but the saturation level is not commensurate with the interest level cryptocurrencies have attained among the public. The number of firms that issue crypto-fiat debit cards has reduced significantly and there’s nothing to suggest that things will pick up in the near future.
Most firms issuing crypto-fiat debit cards stopped operating mainly because they, or the third party that helped them in issuing the cards was banned by financial authorities. In 2018, Visa banned WaveCrest, the company providing most crypto-fiat cards and card issuers like CryptoPay, Bitwala, TenX, and Wirex either suspended their services or reduced support to specific countries.
Card charges also discouraged people from opting for a crypto-fiat debit card. There’s no point paying up to $10 as a monthly card maintenance fee if your intention is to HODL. Some companies even charge as high as $250 to get a card.
Crypto price volatility didn’t help matters. The value of a T-shirt can rise from 0.1 ETH to as much as 0.15 ETH while you’re still at the store. No one wants to lose money. People will lose interest in crypto-fiat debit cards if cryptos fluctuate wildly all the time.
A Way Forward
In the current landscape, most crypto-fiat debit cards draw from an unstable deposit of cryptocurrencies and are provided by exchanges and other profit-oriented institutions. That’s why these cards have numerous charges attached to them. There will be less charges and more users if these cards are issued by crypto projects instead.
For instance, consider Sudan Gold Coin (SGC), a cryptocurrency project that lets you key into the gold market in Sudan. This project issues crypto-fiat debit cards that draw from a balance of Sudan Gold Coins, the native token of the ecosystem which is valued in gold – a stable, physical commodity.
SGC’s crypto-fiat cards won’t have charges as high as other crypto-fiat debit cards because the project’s main goal isn’t about making money. SGC’s concern is leveraging the power of blockchain technology to deliver a decentralized trading platform for gold and other precious metals.
The biggest issue stopping crypto-fiat cards from going mainstream is crypto price volatility but there’s little anyone can do to remedy that. This problem will ultimately solve itself. Crypto prices have actually been less volatile over the last couple of years.