This morning I clicked on an ad from yet another trading platform I’d never heard of before because it was claiming to offer a Bitcoin debit card. Once again I was disappointed because all it did was allow you to withdraw US Dollars from your trading platform account to a plastic card which could then be swiped…
…which is really no different than requesting a withdrawal from your trading platform to your checking account, or going through a service like Coin RNR, and then spending the withdrawn amount using your checking account debit card (which most likely has far better security and customer service anyhow).
Various Bitcoin businesses seem to have this obsession with providing people with a way (however lame) for them to transfer their fiat holdings to a swipeable piece of plastic and then they fall all over themselves touting said swipeable piece of plastic as (wait for it) a Bitcoin debit card!
Yay! I have always dreamed of being able to transfer US Dollars to a piece of plastic and then take that piece of plastic to to the grocery store. Ever since I got involved with Bitcoin. And now so many Bitcoin services are offering it I don’t know which one to choose!
Oh wait! I’ve been using bona fide debit cards for years, long before I ever owned my first Bitcoin or even knew what the word meant.
When I use my debit card, it seamlessly deducts an exact amount of money from my bank account and uses that to pay the vendor which swiped my card in exchange for the stuff I bought.
That is what I want to see in a true Bitcoin debit card. I would like to carry a Bitcoin balance on a secure online wallet which is linked to the swipeable plastic. When I decide to swipe my card, my account conducts an instant exchange where some Bitcoin is sold for Dollars and those Dollars are then transferred from my account to the vendor. The main difference in this case between a true Bitcoin debit card and a regular bank account is that with the Bitcoin debit card, there is an instant sell which goes on at the time the card is swiped. Whatever the Bitcoin/US Dollar exchange rate is at the time plus a reasonable premium is what I get. When I go home to check my balance I will see it as a debit of Bitcoin. I imagine I might notice a bit less than a Dollar added to my fiat balance as it may be difficult to make an instant sell for an exact amount and the system may overshoot it a bit. I would have no problem with that as long as the error was within a Dollar or two, and the amount of Dollars I had was taken into account with the next card swipe.
I believe the challenge lies with the instant Bitcoin sell which would necessarily take place at the point of sale. I don’t believe it’s insurmountable, but it seems to me that is precisely what no one seems to want to offer.
But I think it would be a simple matter of writing some good code for that to become a reality. I’m not a programmer so I may be missing something, but it seems to me that this wouldn’t be too difficult for a good coder to take on.
Because of the instant sell which would necessarily take place every time the Debit card holder swiped his or her card, the most likely type of Bitcoin service I can see providing this is a solid and reputable trading platform. With Cryptsy on the verge of getting into the Bitcoin/US Dollar market and knowing that they have been preparing for this opportunity for at least a year, getting their employees trained in anti-money laundering and implementing Know Your Customer procedures, I believe they are a good candidate to tackle this challenge once they get their Crypto/fiat markets working smoothly.
I use Cryptsy all the time for trading my Devcoins into Bitcoins, and sometimes for buying or selling other alt coins. Once the Bitcoin/US Dollar market is fully functional I plan to give it a try and see if getting withdrawals to my bank is in any way competitive with Coin RNR. Here’s how I see a true Bitcoin debit card attached to my Cryptsy account behaving.
First of all there would be settings in my account where I could select which balances would be the first to be used when I swipe my card. The options would be US Dollars, Bitcoins, Dogecoins (since Cryptsy is also opening up a Dogecoin/US Dollar market). I would choose for my card swipe to first target my US Dollar balance if there is one, and second, my Bitcoin balance. I would leave my Dogecoin balance alone since I do not wish to sell any at this time. With this setting if I knew that I was going to be using my debit card in the next few days, I might choose to make a manual trade ahead of time and simply have my card swipe pull from my fiat balance. I don’t want to have to do that, but it’s a nice option.
If I had no US Dollar balance, then the card swipe would pull from my Bitcoin balance. If I had a partial US Dollar balance, then the amount of Dollars I had would be used to determine the amount of Bitcoin I had to sell. For example, let’s say I swipe my card for $35, and I have a balance of $5. At the time I swiped my card, all five Dollars in my US Dollar balance would be debited, and the remaining $30 would be raised by selling the appropriate amount of Bitcoin from my Bitcoin balance.
Let’s say that the price of Bitcoin is $1000 and there are no trading fees (just to make the math really easy). In the above scenario where I make a $35 purchase but already have five Dollars available, at the time I swipe my card, this would trigger an instant sell of 0.03 BTC to raise the needed $30. Let’s suppose I had a balance of two Bitcoins before I swiped my card. After the purchase I go home and check my balance. It will then show zero Dollars and 1.97 BTC. It will also show a record of a trade where I sold 0.03 BTC at $1000 per BTC. Then it would show a record of a withdrawal made to whoever the vendor was, Target, for example.
The reality, of course, is that there are trading fees, and the price of Bitcoin is rarely a nice round number anyway. I also expect that a service like Cryptsy would have to charge a higher trading fee for debit card purchases as it would for normally executed trades, and that would be worth paying for the convenience. One could avoid paying the premium by simply executing a manual trade prior to the card swipe, and some users may prefer to do that. Some of us plan ahead for purchases better than others. I imagine I would sometimes plan ahead and make the trade ahead of time; at other times I would go ahead and let the card swipe trigger the trade and happily pay extra for that convenience.
In either case, my US Dollar balance and my Bitcoin balance would remain within my Cryptsy account until the moment when I actually swiped the card. At that moment, once the necessary trades were executed, the amount of the purchase would then be automatically transferred to the vendor, and this would register on my account as a withdrawal to an external account. My balances would in no way be tied to the card until the moment I swiped the card. If I lost the card, I could simply cancel it either online or by phone. In fact, I should be able to at any time add or remove the link to the card by toggling a setting on my account dashboard. There is never the situation where I withdraw funds from my Cryptsy account and add them to the card. The card should never be a container of funds in and of itself, but instead a pipeline for funds to move from my Cryptsy account to a vendor account. There is no reason to have a situation where if I’ve lost my card, I’ve lost all the funds that were added to it, because funds never get added to the card.
Why would I want a service such as Cryptsy to provide me with a Bitcoin debit card, a real one? As I mentioned before I already have a very good debit card issued by my bank as well as an easy way for me to transfer funds from selling Bitcoins to the associated account.
The reason is Dollar cost averaging. Rather than make a large Bitcoin to Dollars trade every couple of weeks or once a month, I want to be able to trade my Bitcoins out on an as needed basis, the result being I make a series of smaller trades, which overall leads to me getting a better average price for my Bitcoins. I’d also prefer to have the process of selling Bitcoin and transferring the fiat more automated. The way I do it now requires about an hour of my time to monitor the process from start to finish; I’d like to be able to do it on the go without having to think about it any further once I’ve inputed my desired settings.
In my opinion, a real Bitcoin debit card has to be secure, easily replaced, able to trigger automatic trades and funds transfers as needed, and able to be controlled from a user’s account dashboard. A real Bitcoin debit card allows its user to take advantage of Dollar cost averaging by only triggering Bitcoin/Dollar trades as needed by the user to make a purchase, and where there is no minimum trade or transfer amount. Any kind of swipeable card which provides any less than the above features is not a bona fide debit card, but rather, a piece of swipeable plastic trying to pass itself off as one. Because conventional banks already do a great job of providing their customers with debit cards and the necessary associated customer service, there is no reason for any kind of Bitcoin business to try to provide one unless it can provide everything the bank debit card has, and make it better by making it possible for users to automatically and seamlessly turn their Bitcoin balances into fiat at the point of sale.
Because a sale of Bitcoin is a necessary component of such a debit card, it makes sense that a reputable trading platform would be the provider. Of all the trading platforms I know about, I believe Cryptsy is the one best positioned to be able to provide its users with such a service: the very first real Bitcoin debit card.
The one question I have is this: when will Cryptsy do it?