Bitcoin

Bitcoin at the checkout? Bringing ‘spendability’ to crypto

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Since the birth of cryptocurrency, many have questioned whether tokens can count as ‘real money’. Cryptocurrencies – Bitcoin, Ethereum, Litecoin – have caused a buzz in the financial world, with leading financial figures often disagreeing publicly as to what they are and as to their future. All cryptocurrencies have the same foundation of using blockchain for value exchange. Some cryptocurrencies are focussed on creating a new digital money, others take the same principle but apply it specifically to a wide range of varied applications.

A $15 coffee?

Cryptocurrencies share all the key qualities of ‘ real money’, except for the single most crucial characteristic: the ability to access and spend cryptocurrencies at merchants and retailers as quickly and easily as regular cash. Without this ability, widespread adoption of crypto will falter. That it is so difficult to  buy your morning cup of coffee, or your weekly grocery shop, with your digital coins is testament to the spendability problem that plagues crypto.

To date, it has been particularly difficult to spend small amounts of cryptocurrency and handling payments has become a barrier to cryptocurrencies becoming adopted as a viable payment method. In January, using Bitcoin, it could cost up to $15 to get a transaction recorded by miners, which means a $3 coffee increasing fivefold in price: making it almost useless as a means of exchange for small transactions.

However, promising new methods of payment are emerging that allow for the instant spending of cryptocurrencies at merchants and retailers, utilising an electronic credit-card sized device. In the near future, these cards will also hold the details of the user’s existing regular credit and debit cards. This follows a trend within banking that sees customers actively moving towards products that aggregate all of their spending methods, bank accounts, bills and other assets into one single screen or platform. This much can be best observed in Curve – a single card that, at the press of a button within an app, can transform itself into any of your various credit and debit cards – or with apps such as Money Hub that aggregate a user’s bank accounts into a single screen.

Changing crypto’s image

Crypto has often been seen as catering to a group of crypto-enthusiasts who wish to keep all their assets in cryptocurrencies and who shun regular banks. This is certainly true of the evangelists in the community, and this emerging trend will enable them to spend their crypto currencies alongside or even in place of any fiat currency that they use – making their experience similar to anyone using a traditional bank.

Much like regular credit and debit cards, these all-in-one cards of the future will contain an EMV chip, enabling them to be used like any card at merchants and retailers to pay for purchases in local currency. However, the difference is that behind the scenes, payments are automatically routed to partner crypto exchanges and display as instantly debited from users’ cryptocurrency balances. In doing so, there is a hope that crypto users will soon be able to spend their currency on goods without the fear that their transaction will incur exorbitant transaction costs. A $3 coffee will hopefully remain $3 dollars when you use crypto.

One such example of these factors intersecting is the prototype FuzeX Card, which is due to shortly be introduced in the UK is identical in size and thickness to a standard debit or credit card. It contains an EMV chip, a dynamic magnetic strip, an e-paper display and three input/option buttons, allowing users to physically see the balance of their cryptocurrency accounts before spending. This gives users all the function of a regular debit or credit card, even incorporating into the card the services that would normally be placed in an app, and crucially bridges the gap between crypto and regular currencies.

The regulatory underpinning

In the UK, such developments have been made possible by the country’s Open Banking regulations. Traditional banks are now required to let their customers safely share account data with third parties like FuzeX or Curve, providing them with “read only” access to customers’ accounts. This effectively makes banks responsible for underwriting their customers data security and allows third parties to aggregate account data into a single view or service.

The Open Banking regulations and changing consumer banking trends, particularly among millennials, together signal that there is an appetite for the convenience offered by an all-in-one card that spans multiple currencies and payment options. While aggregator cards like Curve are proving successful as all-in-one card options, they lack the ability to effectively bridge the normally segregated crypto and fiat currency markets. This is something that needs to be addressed to make cryptocurrency more viable as a legitimate currency alternative.

The future of crypto

Crypto has often been heralded as the currency of the future. And despite the doubting of its detractors, we are finally seeing it come of age and gradually trickle into the mainstream. This will hopefully pave the way for more widespread adoption of crypto as a means of exchange and also add weight to those currencies that have specific use cases: making their goals all the more achievable.

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