The cryptocurrency industry has experienced rapid growth in recent years and has become more widely accepted as a legitimate part of the financial world. However, the volatility of Bitcoin and other cryptocurrencies, and the downfall of crypto exchanges like FTX have brought added scrutiny to the technology. As a result, more people are starting to feel less confident about incorporating cryptocurrencies into their financial portfolios.
Cryptocurrency debit cards are one way that the industry is trying to enter the mainstream market. These cards work similarly to traditional debit cards, but instead of drawing funds from a bank account, they draw from a cryptocurrency wallet. This allows users to spend their cryptocurrencies at any merchant that accepts debit card payments.
However, the success of cryptocurrency debit cards has been limited so far. One reason for this is that the infrastructure for processing cryptocurrency transactions is not yet as developed as traditional payment systems. Additionally, the volatility of cryptocurrencies can make it difficult for merchants to accept them as payment, as the value of the cryptocurrency could change dramatically between the time of the transaction and when the merchant converts it to fiat currency.
Despite these challenges, many believe that cryptocurrency debit cards have the potential to be a game-changer in the industry. If successful, they could help to bring cryptocurrencies into the mainstream and make them more accessible to a wider range of people. It remains to be seen whether these cards will be widely adopted and whether they will be able to overcome the challenges that have prevented their success thus far.
The Cryptocurrency Evolution
Over the last several years, cryptocurrency has experienced some significant changes. It has gone from humble beginnings as a medium used in transactions (two pizzas were traded for 10,000 BTC in the first cryptocurrency exchange) to a digital asset seen more as an investment than a true system of payment in transactions.
The onset of banking stability, high inflation, and depleting role of the US Dollar on the world stage has started to shift again to be more in line with its original mission. To function as an electronic cash system for transactions. So, will the next step be a cryptocurrency debit card? And does cryptocurrency really need to be used as a payment method to be adopted more thoroughly into the mainstream?
Cryptocurrency Cards: The Problems
The move into debit cards for use with cryptocurrency has long been a goal of many in the industry. Some of the traditional market’s most important players have been showing interest in the possibility for some time now. But the road to cryptocurrency debit cards has not always been smooth. In fact, just a few months ago a scandal in this marketplace rocked the financial industry.
Wirecard, long viewed as a potentially dominant player in this subset of the market, suddenly became the subject of controversy when news of the initiation of insolvency proceedings broke in June. The German fintech group filed for insolvency, admitting that the 1.9 billion euros (or $2.1 billion US dollars) it had claimed was missing from its accounts did not exist.
This was more than just a financial failure, however. Long-time company auditor EY even noted it seemed to be an ‘elaborate and sophisticated fraud.’ Markus Braun, the former CEO of Wisecard, was arrested and is now suspected of market manipulation.
Less recently, in 2018, the digital payment solutions provider WaveCrest was forced by Visa to immediately close all of the prepaid Visa cards it had issued, citing non-compliance with membership regulations. These incidents show some of the problems with regulation in the cryptocurrency space. Additional companies are likely to come under fire in the years to come for their business practices. Such problems are also a hindrance to the growth of the industry and its adoption into the mainstream.
Can Cryptocurrency Cards Work?
Credit cards and debit cards are some of the oldest ‘new’ financial technologies in the industry. Today, they are a common part of our daily lives, but when they were first introduced, they represented a revolutionary concept. It should come as no surprise then that the two main players in the traditional credit card market have begun looking for ways to get involved in the cryptocurrency space.
Both Mastercard and Visa, giants in the credit and debit card space, have expressed interest in improving technology and expanding into this new market space. Mastercard recently announced a partnership with Wirex, allowing it to issue a new digital payment card on the Mastercard network. Visa recently published a blog post detailing its interest in partnering with top blockchain players and expanding its technologies.
Even those uninterested in cryptocurrency in the past, like PayPal, have begun to enter the cryptocurrency space. In a partnership with another top player in the fintech industry, Venmo, Paypal is making moves to allow customers to purchase Bitcoin through its site and through the companies’ mobile apps.
There are financial experts, though, who don’t believe cryptocurrency cards have a place in the industry. After all, the banks already pay these payment processing companies for the opportunity to issue cards, along with many other intermediaries that collect some form of payment along the way.
These extra expenses are part of the reason that non-traditional payment companies are entering the race to create a cryptocurrency card. But that doesn’t mean Visa or Mastercard couldn’t take the current options and make them work for cryptocurrency. Perhaps we will indeed see a cryptocurrency debit card soon.
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