We first learnt about Bitcoin back in 2009. Since then many other crypto currencies, exchanges, services and applications have emerged flooding the entire information space and seeking to become an alternative to the traditional financial system. However, many people around the world still remain skeptical about crypto currencies, and not just because they consider them fraudsters’ tools. One of the most common issues is a trivial lack of knowledge about how one can use them in an easy and simple way in everyday life. It seems that the problem could be solved by mass distribution of cryptocurrency cards, which would make it easier for an novice user to ‘enter’ the cryptocurrency market. Many current projects already try to play in this field, but not everyone is successful. We’ll tell you why this happens and what challenges people face when using crypto cards and the issuers encounter in creating them.
Crypto cards – what they are
Overall, a crypto card is a payment instrument no different from a regular debit or credit card enabling to make offline and online transactions, purchases and pay for services. The only difference is that a crypto card is not tied to a bank account where your funds are deposited, but to an electronic wallet on the blockchain where your cryptocurrency and various tokens are kept. In order to receive a card, you need to register with the relevant card issuing and service entity (e.g. Platincoin, WaveCrest Holdings, Metropolitan Commercial Bank, Wirecard, etc.). As a rule, all issuers currently offer similar options: 1 to 3 currencies can be stored on a card, the card issue costs between $10 and $20, annual service fees vary from $10 to $15 and the card is valid for 3-5 years.
Crypto cards pros and cons for holders
The main advantage of crypto cards is the user convenience. Firstly, they offer broader opportunities for interacting with cryptocurrency, as it can be spent almost anywhere in the world where MasterCard or Visa support is available (and this is almost everywhere). Secondly, crypto cards enable the use of different currencies, and thirdly, you can quickly make any transactions without waiting for the funds to reach your bank account - everything happens in seconds.
However, despite all obvious advantages, crypto cards’ disadvantages are currently much more visible. The first is transaction fees on all transactions whether transfers or payments for goods or services: because of their amount, you’ll always pay a little more than with a conventional bank card. The second is that there are just a handful of projects enabling to pay directly with Bitcoin, not to mention the other coins of which there are a multitude of. Accordingly, there are few partner banks willing to finance crypto currency transactions as they see more risks than practical benefits for their business. The third drawback is a breach of anonymity, which blockchain seeks to ensure, because under the KYC procedure the card holder must be verified and even his/her address must often be confirmed. And while there is nothing unusual about this, it can be an obstacle for those who use a crypto currency precisely because of its complete anonymity.
The fourth, but no less important disadvantage is potential issues with the laws of different countries. As crypto currency transactions are not subject to state or bank regulation, the card use may be considered illegal (in Russia, for example), and Visa and MasterCard have banned issuance of crypto currency cards outside the US and Europe. We can say that all the advantages described above apply only to the two above mentioned zones while there are quite severe restrictions in place in the rest of the world on using crypto cards and cryptocurrencies in general.
Crypto cards challenges for issuers
For the most part, many services that promise to issue their crypto cards delay it only because there are many legal problems to be resolved. As mentioned earlier, crypto currencies use is not legalised in many countries, and in order to ‘break through’ into the market, it is imperative to resolve the issue with banking and government agencies, which may not always bring results.
At the moment, crypto currencies and, consequently, crypto cards are particularly common in the UK, the USA and Japan. In addition, they are also used in Denmark, Canada, Sweden, Estonia, the Netherlands and some other countries. However, they are either completely banned or partially restricted in Russia, Germany, Czechia, Israel, Switzerland and China. In China, for example, banks are not allowed to affect any crypto currency transactions or launch their own ICOs, but at the same time the crypto market in China is considered one of the most advanced - it is possible to buy and sell crypto currencies without any problems.
A stiff market competition is another reason why creating own crypto cards may be a challenge for many companies. Under current restrictions in place in some countries, card issuers literally fight for each customer because they cannot expand their sphere of influence and to do so, they need to offer more advantageous conditions: for example, higher cash back for purchases and lower commissions or service charges. But the paradox is that price reduction is unfavorable for services that lack financial support from partner banks while, on the other hand, every new customer is important for them.
The bottom line
The crypto card market is just developing and it has certain potential. The idea of creating a debit card, familiar to everyone in terms of functionalities but supporting crypto cards can attract more potential users - especially those who have so far had nothing to do with the crypto card market because they think the structure is complex and potentially dangerous. Crypto cards perform a kind of educational function, showing the world that everyone can use an alternative currency, because it is convenient and practical.
However, the nuances such as legal restrictions and the traditional financial system, in fact, impede the advance of crypto currencies and crypto cards, making, among other issues, attraction of new users more challenging. Of course, these problems can be resolved as this market evolves, but at this stage the issuance and use of crypto cards carry certain risks.