2 days ago, an article in Forbes discusses how Visa awarded full membership to the Crypto exchange Coinbase:
Credit card giant Visa has granted its principal membership to a cryptocurrency company for the first time. Officially awarded to cryptocurrency exchange Coinbase in December, but not revealed to the public until today, the membership cuts out a crucial, and expensive middleman from the process of issuing a debit card that lets users spend their own bitcoin, ether and XRP anywhere Visa is accepted.
While Coinbase did have a Visa card before, it was done through a 3rd party (PaySafe) that took its own cut off eevery transaction. This time around, Coinbase can issue actual Visa cards to its users, allowing them to spend actual crypto in exchange for fiat.
If you'd like a TL;DR of the article, feel free to watch the video - it summarizes all well enough. (NB: I tried my best to embed the video here publish0x editing tools are not there yet. Sorry for the link).
Coinbase will initially offer this service in Europe. I'm guessing US rules on spending crypto, and the major push-back from Congress on projects like Facebook's Libra, will make the US an unfriendly ground for crypto-finance projects in the foreseeable future.
Some of my thoughts
A move like that by Visa (and Coinbase) is not inherently "good" or "bad". You can choose to use it, or ignore it (or if you live in the US, the choice has been made for you). But I thought I'd share some of my thoughts on the move, as a crypto enthusiast.
1. Old problems
To me, Visa is "the old world". Credit cards have been around a while. They were part of the problem cryptocurrencies were built to solve. Dragging them back in rings hollow. I'd have imagined that by now, since we all have smartphones, paying with crypto would have been easy, and CC companies would have had to reinvent themselves to compete with the new contender. Doing this injects new life into their old business model, and keeps them around (hopefully, not for long).
I won't go so far as calling Visa "the enemy". They're a company doing its best to move with the times. But I'd like to see them doing more - maybe offer an actual crypto solution, rather than more of a patch.
Credit card companies live off fees. These fees in turn make all our lives more expensive. You may not realize it, but whenever you pay for anything (especially online), the seller has already included in the price the fees he'd be required to pay to get your payment. This card will be the same: while from the payer perspective, it is "fueled by crypto", the guy who accepts your card will have to pay Visa (or Square, or Stripe) 2-2.7% of the transaction to get the money.
And let's talk about that model for a second: to a computer, processing $2, $20, $200, or $200,000 takes the same amount of time, and the same complexity: debit one account, credit another with the exact sum, minus a fee. Why then, will the seller have to pay $0.02, $0.20, $2, or $2000 for a transaction? That model HAS to go.
(PS: I know that gas prices on the Ethereum network also grow with the amount transferred, but they don't grow exponentially - more like actual storage considerations).
3. Blockchain usage
We'd all like to see blockchain technologies become more widely used. Well guess what: paying with a Visa uses 0 blockchains to actually pay. More likely, you cryptos are used as collateral, while the actual fiat transaction is the same one all your other Visa cards are involved in, using the same old, slow, centralized systems, that blockchain came to replace.
I hope the next generation of payment systems will rely on blockchain technology 100%, and will replace those plastic pieces we have to carry in our wallet.
4. What are the tax implications of using a cryptoVisa?
Right now in the US, every time you sell a crypto, it's a tax event. Yep, that's extremely stupid, but that's where we are. I'm not sure about the laws in the EU. Now, imagine every time you scan your Visa, there's a new tax event in your life. One you need to report come April 15th. Would you use that Visa to pay for your meal? Would you buy anything at the Dollar Store with that Visa?
I realize this is mmore on the lawmakers and the SEC to fix. I also realize that's one of the reasons this Visa is not currently offered in the US. But the fundamentals need to be fixed, before crypto financial solutions could become more widespread.
So that's my quick $0.02 on the Visa/Coinbase announcement. What are your thoughts? Please share them in the comments. Also, feel free to suggest ideas for my next posts. And check out my other articles if you like my writing style.