Bitcoin wallet provider Xapo has announced it is to launch its much-awaited bitcoin debit card this month.
The possibility had been raised that the Xapo card would launch on the MasterCard network, but this turned out not to be the case.
However, as industry news site Payments Source points out, Xapo has a number of potential partners aside from big brand cards such as MasterCard and Visa. Independent network rails such as Star, Pulse or MAC would allow merchants to accept debit transactions even if they are not affiliated with a particular bank.
A significant problem for the youthful bitcoin community is that big banks and card operators have proved reluctant to deal with cryptocurrency-related businesses. MasterCard says it is keeping track of legislative developments related to bitcoin, though, so this situation could change in the future.
Madeline Aufseeser, who is a senior analyst at the Aite Group covering credit and debit card issues, told Payments Source that she believes banks could issue and operate bitcoin debit cards in theory, but in practice it could prove tricky.
"Most non-financial institutions don't realize the extent of due diligence and requirements of becoming a licensed issuer,” she warned.
Aufseeser also argued that major card networks would highly scrutinise any connections with bitcoin, as they would prefer not to tarnish their reputation with the lingering associations people make between digital currencies and illicit activities.
Demand is high
Xapo started accepting pre-orders for its debit card in April, charging a $15 one-time shipping and handling fee, and limiting users to one card per wallet account. The company indicates that customer demand has been strong, but has not disclosed any numbers.
This is not the first attempt at a practical bitcoin debit card. Coincard and Cryptex cards were announced a while ago, but Xapo insists its system has advantages over these rivals. Notably, while users of Coincard and Cryptex cards must preload them with bitcoins and manually convert bitcoins, users of the Xapo card do not, as it debits directly from the wallet.
A further issue with merging bitcoin with traditional card networks is that users will still have to pay standard debit card fees. However, for many this is an acceptable trade-off, as they would gain access to a huge ATM and merchant network. As always, there is a price to pay for convenience.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.