by Jamie Holmes
On January 5, users of various bitcoin debit cards were notified that their cards have been temporarily frozen and unable to use them. Wavecrest, the company that issues pretty much every bitcoin debit card in existence, stated to its customers that they were instructed to close down all prepaid cards they had issued immediately. Is this the beginning of the end for bitcoin debit cards?
The surprise is that no announcement or forewarning was given to their users. Many bitcoiners now have funds on their card they cannot use. Some have gone on Twitter and Reddit to confirm the story, saying their transactions have been declined. With a lot of people using these cards as a fiat gateway to manage daily expenses with bitcoin, the Wavecrest announcement is sure to cause some short-term difficulties.
One way around the problem is to use bitcoin ATM’s, but these have unfavorable fees (even compared to debit cards), frequently run out of cash, and do not always allow the sale of cryptocurrency in exchange for fiat. The best option, is then, peer-to-peer networks. If you haven’t built a list of contacts using Mycelium’s Local Trader, Localbitcoins, or Localmonero and are not using Bisq or other decentralized exchanges; now is the time to do so.
The reasons for the immediate shutdown of a vital gateway for bitcoiners is not explained. Unsurprisingly, many theories are being put forward focusing on the tension between banks and bitcoin, and the former’s attempt to impede the growth of cryptocurrency. Visa, which provides Wavecrest with the prepaid cards, said that operating rules were not being met by the Gibraltar-based firm and that other crypto cards would not be affected.
LitePay is anticipated to be released soon, which will provide a litecoin to fiat Visa card and may be worth keeping an eye on if you’re looking for a new card provider.
Wirex, one of the companies that use Wavecrest-issued cards, stated that they are working with a new issuer, will process refunds for canceled cards and roll out contactless cards in the near future. Wavecrest seems to have a stranglehold over bitcoin debit cards, with almost every provider working with the company. Affected companies include; AdvCash, Bitwala, BitPay, and Xapo.
Another explanation for the move is given by new regulations that were put in place for January 1, 2018, in Gibraltar. The regulatory framework in question indicates that Wavecrest may have to apply for a Distributed Ledger Technology lIcense to continue to operate. There are concerns that the shutdown may be related to unverified cards handed out by Wavecrest, which could enable money laundering, although on a very small scale since verification is needed to increase the limits.
Of course, this might not spell the end of bitcoin debit cards, as they are a few other, smaller providers that do not rely on Wavecrest, but does highlight the need for new entrants into the market for bridging the gap between bitcoin and fiat.
What’s the point of “be your own bank” if we let someone else do it for us? Sure, we’d like the convenience of using a card like everyone else, but what’s needed is a broader, more serious push for bitcoin (as well as litecoin and monero) adoption, similar to the manner in which Arnhem’s BitKassa encouraged merchants to accept the cryptocurrency.