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Bitcoin debit card could be available in July

 
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June 12, 2014
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Want to use digital currency for everyday purchases such as filling up the gas tank, ordering Chinese takeout or getting an eyebrow wax? A new debit card — billed as “the world's first bitcoin debit card” — could be available in July.

Silicon Valley financial services company Xapo plans to release a debit card that will let consumers pull out plastic to pay with bitcoins, the digital currency of the peer-to-peer digital payment system with the same name, which runs with no central authority or banks.

Xapo, which was started with the goal of giving consumers ways to securely store and conveniently spend bitcoins, already offers a digital vault and digital wallet to hold bitcoins.

At the end of April, Xapo began allowing customers to sign up for a Xapo bitcoin debit card. Cardholders will be able to use their new plastic to make payments anywhere in the world that accepts debit cards — in brick-and-mortar stores or online.

Because the card is not yet out, consumers who want to use bitcoins to pay at a brick-and-mortar store must pull out a digital wallet, using their mobile device to scan a Quick Response (QR) code at the checkout. As we've seen in the past, mobile wallets and QR codes can't always be relied on — and sometimes they send store clerks into a tizzy.Click to email me

Xapo wants to change that with its debit card. It claims  store clerks will never even know your Xapo debit card is different from those being swiped by other customers because as soon as you pay with your card, the bitcoin is converted to the local currency to complete your payment.

Other companies have introduced cards that are similar to prepaid cards — when the customer must plan ahead for a purchase and manually convert bitcoins to their local currency — but there's no other card that functions seamlessly as a debit card, using only bitcoins, says Xapo founder and CEO Wences Casares.

But what about fees? The customer pays a one-time printing and shipping fee of $15 for the card, and merchants pay a fee when it's used, as they do with other debit cards and credit cards, according to Xapo. But you have to be a Xapo customer, storing your bitcoins in a Xapo vault, to use the card. To use the vault, you pay a fee of 0.12 percent of your initial deposit. Then, each year you pay the same percentage of any additional money deposited, but the fee is prorated based on how long the money has been in the account. (However, it's free to use the Xapo wallet.)

What are the cons of this new debit card? First, how many people are clamoring to pay for their everyday expenses with bitcoins? Seventy-six percent of U.S. residents “don't have a clue what it is,” according to Forbes.

Those who do know about Bitcoin might associate it with illegal gambling or buying drugs in clandestine online marketplaces — such as the infamous Silk Road, which has been shut down.

If you're fuzzy on the facts about Bitcoin, check out Bitcoin.org. According to Bitcoin.org, the payment system offers several pluses, including fast international payments and no or low (mostly voluntary) fees.

But some of the purported advantages of Bitcoin also could be considered disadvantages: For example, it's decentralized, so unlike official currency, Bitcoin is not backed by any government. That means it lacks the regulation and fraud protection offered by governments and banks.

Also, the Xapo card could take away one of the major advantages of bitcoins. Careful bitcoin users can sometimes keep a transaction from being linked to their real identity. And consumers can buy bitcoins without revealing their name or other identifying information by making a cash deposit into the bank account of a bitcoin vendor.

[Related story: Shop, hide your identity: sunglasses optional]

Using Xapo services takes away some of that privacy. Xapo stores customers' names, email addresses, birthdays, locations and possibly mobile phone numbers.

And there's one practical downside of the Xapo debit card: What if you want to make an ATM withdrawal or get cash back at the register to turn your digital currency into dollars? You're out of luck — at least for now. “It's something we're looking into,” Casares says.


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