Not too long ago, there was just one company dominating the cryptocurrency debit card space. That was Wirecard; however, when the multibillion-dollar company suddenly and unexpectedly announced that it was insolvent, a large void opened up. Now, there has been significant interest on the part of companies around the world to launch cryptocurrency-based debit cards, and FinTech and cryptocurrency expert Jason Simon explains why.
Wirecard had been a global tech darling, taking a dominating position in the cryptocurrency debit card sector. However, the Germany-based company filed for insolvency last summer, admitting that it had lied about its financial strength and acknowledging that it owed over $2.1 billion in outstanding debt. While this may have indicated to some that it was another reason why cryptocurrency was not a viable alternative to fiat, the nature of the mismanagement revealed the true reason for the sudden demise, and it had virtually nothing to do with digital currency. It was all tied to embezzlement and fraud on the part of a few top-level executives. Most notably, former CEO Markus Braun was arrested after being suspected of trying to manipulate financial markets.
Even prior to the major scandal, there had been more interest in cryptocurrency debit cards, with companies like Visa and MasterCard showing a change in their views. Explains Simon, “Visa, in particular, was quick to jump on any entity offering cryptocurrency debit cards that were tied to its network. That position had been in place since before the Bitcoin boom of 2017 but, in 2020, it suddenly flipped. Now, it is embracing digital currency and has already partnered with a number of blockchain companies. Ultimately, Visa’s network of 61 million global merchants will have access to cryptocurrency payments.”
MasterCard is making it easy for its network to get involved, as well. It has partnered with Wirex, a cryptocurrency payments platform, to allow digital currency companies to use its network to issue cards, and has previously embraced several blockchain initiatives. With a global reach that is parallel to what Visa offers, this means, in the very near future, consumers are going to find that paying with cryptocurrency debit cards is as easy as using traditional bank-issued alternatives.
Part of the reason for the push to offer cryptocurrency debit cards stems not from consumer demand, but from consumer concern. Says Simon, “Inflation is on the rise and doesn’t show any signs of slowing down. As this occurs, leaving money in a bank account and drawing interest becomes less valuable, since the interest earned is below the inflation rate. As a result, storing funds in cryptocurrency becomes more appealing, as those funds will better hold, or grow, their value.”
The transformation has already begun and the outcome is tangible. Cryptocurrency exchanges are seeing more deposits being made than ever before, with a significantly greater amount of fiat to cryptocurrency transactions. Some have reported increases of as much as 50% in as little as seven days, and the trend continues to grow exponentially.
In addition to Visa and MasterCard, other card issuers are showing greater interest in digital currency. American Express already has an established presence in the space and asserts that cryptocurrency is “challenging and potentially disrupting traditional B2B payment methods” already. AmEx has invested in several cryptocurrency platforms, even as Visa and MasterCard were trying to keep their distance, and has routinely been more amenable to digital currency as an alternative to fiat.
As the major card issuers show increased interest, cryptocurrency companies are following suit, negotiating deals to offer Visa- and MasterCard-backed cards that can be used to make purchases with cryptocurrency holdings. Adds Simon, “The global consumer market is only on the starting line of what is coming. Within only a few short years, cryptocurrency debit cards are likely to be almost as common as traditional offerings and, just a little later, could possibly dominate the payment sector.”