The Bitcoin financial services ecosystem continues to develop as the cryptocurrency gains greater mainstream acceptance and in light of that it was only inevitable that a debit card solution would be in the offing. Xapo is a company that is planning to offer just that–a debit card that will allow Bitcoin owners to spend their balance anywhere that accepts Mastercard.
Xapo will leverage Mastercard’s payment network and their cardholders will be able to make purchases anywhere Mastercard is accepted. The company will offer a ‘digital’ version of the debit card free of charge with a physical card for use offline will cost $15.
Xapo is a Bitcoin wallet company and already trying to expand their offerings beyond their core business. The arrangement with Mastercard will use their network to confirm that funds are available in the cardholder’s Xapo wallet and clear the transaction. Simultaneous to that Xapo will deduct that amount of Bitcoin from the user’s wallet and sell it on the Bitcoin exchange Bitstamp. The cardholder won’t pay any fees–as is typical with debit transactions the merchant eats the processing charges. Xapo says that the card won’t work with ATMs out of the box but they have plans to add that service later this year.
Technically, this isn’t the first Bitcoin debit card but it is the first one that works like a traditional credit/debit card. A company called Cryptex also offers a card that works with most ATMs and at merchants that accept the Discover card. Cryptex works a bit differently, charging users a fee to exchange Bitcoins for US dollars to complete the purpose. This is very similar to the process of using a credit card in a foreign country, where the purchase is repriced in US dollars for charging to the card. Xapo’s transaction process is the first that settles the transaction in Bitcoins.
Many of the specifics about transaction fees, etc. are still in the works. The company will likely ‘recommend’ that users store their funds in Xapo’s wallet and could offer those that do a break in fees. Xapo is currently accepting preorders for the debit card with the expectation that they’ll start delivering them within two or three months.