Since 2009, interest in Bitcoin and other cryptocurrencies like it has mostly ebbed and flowed with the volatility of the associated exchange rates. In fact, one could argue that the attention paid to cryptocurrencies has primarily been about speculative investment rather than any real belief that about them replacing traditional currencies.
The newly announced agreement between Visa and Coinbase may change that area of focus. In December, Visa granted “principal membership” in its network to Coinbase, the first time a cryptocurrency exchange has attained the status. Among other things, this will enable Coinbase to issue Visa-branded debit cards (although not in the United States for the foreseeable future). However, while the near-term impact on U.S. banks and credit unions remains to be seen, it sends a strong signal about the direction of the winds for which institutions should be prepared.
Means of Exchange v. Store of Value
Basically, a successful currency fills two primary needs; it serves as a store of value and a means of exchange. Coinbase’s Visa relationship is clearly intended to address the latter. Coinbase built its reputation as a cryptocurrency wallet and platform for buying and selling Bitcoin, Ethereum, and the like. However, holders of crypto in whatever form have long faced hurdles in using it to legitimately (read: legal) buy goods or services.
To be clear, Coinbase’s debit card will not literally allow its users to pay for things with Bitcoin; a conversion into euro, pounds, etc. will take place behind the scenes. This is a distinction without a difference to the cardholder and will make the use of cryptocurrency seem far more mainstream and straightforward.
Nonetheless, the “store of value” angle leaves open for debate the extent to which consumers want to use crypto for everyday expenditures. If holders view Bitcoin or Ether primarily as an investment vehicle, it’s far from clear they want to purchase everyday items with an asset they expect to be worth more in the weeks and months ahead. Will they see the process as being akin to, and as unattractive as, shopping with their Apple or Berkshire Hathaway stock?
Making Bitcoin Usable…for What?
It’s indisputable that Coinbase’s move will make it easier to conduct merchant transactions using crypto in 29 countries. It’s also important to remember that some of the shadier common use cases for crypto today include categories prohibited by Visa’s network rules. This will present an opportunity to further interpret the motivation of those making such “off the books” buys. Have they done so up until now because they value the anonymity, or because it’s been too hard to use the currencies for other purposes?
The Bottom Line: Bitcoin is no longer the sensation it was during its late 2017 bubble, but cryptocurrencies have built a solid following with even more staying power now with this latest Visa-Coinbase debit card deal, which will drive more adoption of crypto in turn. It’s safe to assume that if Coinbase’s Visa debit card proves popular in Europe, the model will somehow find its way to the United States. It wouldn’t be surprising to hear of some Americans calling their banks and credit unions looking for details well before that happens. Given the ongoing trend of money being dispersed across a variety of buckets outside an institution’s vaults and firewalls (Venmo, health spending accounts, etc.), it has never been more critical for these organizations – in the United States and abroad – to build and maintain an agile enterprise payments strategy.
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