Up until a few weeks ago, the options for using a card to spend crypto were pretty good. Companies such as BitPay, Bitwala, Xapo, Wirex and Tenx offered services in which holders of crypto could get their hands on a prepaid card.
Generally, the cards let those with crypto convert funds into fiat and spend the proceeds at merchants who accept Visa and/or Mastercard, which is pretty much every merchant that matters.
The cards from the vendors mentioned, and of other providers, no longer exist, much to the inconvenience of the crypto community.
The WaveCrest debacle
Gibraltar-based WaveCrest, a member of the Visa payment network and a major issuer to crypto card providers, on 5 January was forced to cease its activities after Visa cited “continued non-compliance with our operating rules”.
WaveCrest was given no advance warning by Visa and the crypto card providers’ customers were all of a sudden left holding cards that no longer worked, and with no way of accessing the funds still on the cards.
In one example of the disruption it caused, a new cryptocurrency exchange called London Block Exchange, that was offering a card service as a way of enticing new clients to use its platform by providing a wider choice of coins that could be converted to fiat, had to shelve its plans until alternative arrangements with new issuers could be put in place.
Crypto and payment cards haven’t been mixing very well recently, and some might be forgiven for thinking this is all part of a co-ordinated and concerted effort by governments and financial institutions to deliberately make life more difficult for crypto enthusiasts.
Since Visa’s move, bank issuers of credit cards in the US and UK have blocked card holders from buying bitcoin and other cryptocurrencies on exchanges such as Coinbase that accept fiat deposits and credit and debit card payments.
However, this is far from the end of the road for crypto cards.
Opportunities for a new breed of crypto card providers
When Visa cut-off WaveCrest it was careful to state that this was not a blanket policy to discourage the spread of crypto cards. In a statement Visa said: “Visa has other approved card programmes that use fiat funds converted from cryptocurrency in a number of jurisdictions. The termination of WaveCrest’s Visa membership does not affect these other products.”
OK, so there is no conspiracy against crypto, which might suggest that the fault may lie with WaveCrest itself. Perhaps it was being somewhat less than rigorous in the Know Your Customer (KYC) and Anti-Money Laundering (AML) information it required of crypto card providers’ customers.
It is always a business risk to put all your eggs in one basket, and the industry’s reliance on WaveCrest is one such example. However, those crypto card providers with more forward-looking management teams were already looking for alternatives before Visa’s wrecking ball hit. WaveCrest’s global issuance had been progressively curtailed over recent months so that it eventually was only able to issue cards for the European Union.
And, because this is how capitalism works, one company’s problems are another’s opportunity; the first-mover advantage once enjoyed by BitPay, Xapo etc has disappeared. So now the race is on to bring other cards to market and there is one product well-positioned to win that race, and it’s called TokenCard.
The first Ethereum-based card provider
When WaveCrest lost its Visa membership, TokenCard had already been at work behind the scenes securing other solutions. It now has a partnership that will enable it to move forward with its plans, which takes crypto cards to a whole new level.
The TokenCard platform is built on the Ethereum blockchain, which means the card’s user will be able to store and convert to fiat all ERC20-compliant tokens straight off the bat.
And because it is an Ethereum smart contract, in a first among crypto debit cards, Ether can be sent to initial coin offering contribution addresses straight from the TokenCard app and the token received in return can be stored on the card.
Again, leveraging the functionality of Ethereum, there is no need to visit an altcoin exchange to exchange tokens; that too can be done from within the app.
That makes rebalancing your portfolio a piece of cake. If you don’t rebalance after one token mushrooms in value then your portfolio can become unbalanced and diverge from your original investment aims. So, for example, if you have a 10% weighting to tokens that focus on the prediction markets and one of them substantially increases in value, you may wish to sell some and reinvest in other areas or convert to fiat and spend the proceeds.
Token gives owners a cut
Where does the platform token – TKN – come into it, you ask? The token gives its owner a pro-rata share of the assets amassed from the fee charged on transactions.
Incidentally, because that pool is from transactions involving a variety of tokens, it means the pool is diversified and reflects the popularity of particular tokens at any point in time. Because of this, TKN is a ready-made diversifying tool that lets its owners share in the success of the platform.
So this is more than just a card service. But given its card payment and token portfolio services, security is a paramount concern. With that in mind, you will be glad to hear that a lost TokenCard can be immediately frozen using the smartphone app.
TokenCard is yet to announce who its news partner is but is likely to do so soon, as they are currently working on integrating the API into the card software.
Crypto insiders will be waiting impatiently for this new provider’s product to arrive so they can forget that WaveCrest ever existed.
The publisher of bitcoiner.today is not responsible for the opinions or recommendations expressed by its publishers. Investments in ICO's are high-risk investments, you may lose all or part of your investment. Consult with an investment specialist before you act.
The difficult thing is not to learn, the difficult thing is to know how to teach.
Editor and coordinator of the free book “La era de las BLOCK punto COM”
CEO of bitcoiner.today