For bitcoin debit card users, the last three months have been stomach-churning. Even though Wirex has relaunched its bitcoin debit card to UK citizens, the forced closure of the major bitcoin debit card providers like Xapo, Wirex, and Bitwala with no warning has left a bad taste in many mouths. This zero-notice closure - triggered by Visa's decertification of card provider WaveCrest for violation of policy - reflected the wave of bank crackdowns on bitcoin, with most of the major credit card providers blocking bitcoin purchasing with their credit products.
While the crackdown has largely hollowed the bitcoin debit card industry, there are still a few options available. Bitwala, for example, is seeking to create its own banking service in Germany as a backer for self-issued debit cards. The Monaco debit card, which is backed by the MCO altcoin token, has ended beta testing and is moving toward production. Bitpay, Cryptopay, and Shift all offer bitcoin debit cards that are currently available, with Bitpay's being Visa-backed.
The question is, however, should you use bitcoin debit cards? Is there a better option available for everyday bitcoin use?
Banks, in general, have never had a true problem with bitcoin debit cards. Visa's shutdown on bitcoin debit cards was, in reality, the cancellation of card provider WaveCrest's membership from the Visa network for undisclosed operating regulations violations. At the time, however, Visa confirmed that it supported altcoin to fiat currency debit cards and had other members available in good standing in the program.
As a basic financial policy, it makes sense that a bank would want to support altcoin to fiat currency programs. Altcoins are extremely high risk; by transferring these vehicles to fiat currency, the bank is defusing the risk factor for its merchant members. While it may be nice, for example, if Overstock.com accepts transactions in bitcoin, it is nicer - from the bank's perspective - if the conversion from altcoin to fiat is done before the sale and not after.
Using altcoins for everyday purchases without a debit card involves finding merchants that take altcoins as payment. While there are more of these today than at any other time, altcoin-accepting merchants still represent a small percentage of all vendors. Additionally, if you were to live or shop outside of major metropolitan areas, your opportunities to find such vendors offline may dry up. As altcoins serve as a hedge against fiat currency volatility, a bitcoin debit card allows for travel in areas where the local currency is unstable as well. Finally, a bitcoin debit card allows for the withdrawal of altcoins from an ATM as if it was stored fiat currency.
The largest problem with bitcoin debit cards remain the banks. As altcoins continue to be regulated, you must expect that the banks' position on altcoins will evolve as well. It is very likely that another zero notice change to altcoin bank policy will likely happen in the near-future. However, as many bitcoin debit card companies are moving toward self-issuance, this may be less of a problem.
Self-issuance, however, presents new problems. Without being connected to an international network like Visa's, the acceptability of the card is limited. Additionally, self-issuance means that the transaction fees will be non-standardized, increasing the potential for exuberant service costs.
Finally, using a self-issued card means turning over access of your altcoin wallet to an actor that may not have to subscribe to any other regulatory association or legal body for compliance. This raises the potential for fraud.
It is important that you realize the risks involved in engaging in any altcoin activity before committing. As always, due diligence is key.
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