UPDATE (25th April 02:00 BST): MasterCard has contacted CoinDesk to reiterate that it does not have a relationship with Xapo, and that it had no knowledge of the company’s planned product launch.
The company added: “MasterCard does not have a relationship with Xapo. There is no card program currently available.”
UPDATE (25th April 02:30 BST): Xapo CEO Wences Casares spoke to CoinDesk to clarify the situation, stating that the company is currently working with an undisclosed bank to launch the open-loop debit card product, but it has yet to select a credit card network with which to power the offering. However, it was originally planning to use the MasterCard network.
Casares explained:
“If you were to ask me yesterday, I would have said it would definitely be MasterCard, because the cards we have been testing are MasterCard. The cards that we have need a network. If it’s not MasterCard, it’s going to be Visa or Discover, but it will have a network.”
He continued, elaborating on the nature of the agreements underlying the card product:
“The only people who are allowed to issue cards are banks, if you want to issue a prepaid card, you go and work with a bank, and they have a MasterCard or Visa license to issue the cards. They are the ones who have the contract, and have the burden of making sure the program complies to all the regulatory [responsibilities].”
Casares indicated that he is still in talks with MasterCard about the Xapo Debit Card product.
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California-based bitcoin wallet provider Xapo has announced the launch of a bitcoin debit card – a new product it is lauding as the first to allow bitcoin users similar spending freedoms to traditional debit cards.
The Xapo Debit Card debits BTC directly from users’ hot wallets, and can be used anywhere MasterCard is accepted, both online and at physical locations, though it does not represent a partnership between the companies.
Xapo founder Wences Casares explained that the card is designed to appeal to Xapo users frustrated by the inability to spend their bitcoins at most locations, telling CoinDesk:
“You can use it anywhere you would pay with MasterCard, you can use it online, you can use physically at any place you can pay with MasterCard. It makes it very, very easy for you to access your coins.”
The offering is immediately available in both a digital and physical version to existing Xapo customers. The digital version of the card is free, while the physical version comes with a $15 one-time fee that the company indicates covers shipping and handling.
New Xapo customers can also sign up to take advantage of the release. Shipping for all physical cards is expected to begin in two months, the company said.
Customer demand
As of its launch, the Xapo Debit Card is limited to one card per wallet account.
Casares explained that Xapo added the product due to demand from current customers who have wanted a way to spend the roughly 10% of their funds (on average) they keep in the company’s hot wallets. The remainder is stored securely in cold storage.
Said Casares:
“I think that this product is for existing customers who are asking for it. I expect a lot of the current customers to be using it.”
Casares indicated that the ability for users to connect multiple cards to accounts may be added in the future, should customers request the feature.
How it works
Casares said that Xapo receives all transactions when they are initiated by card users at the point of sale.
From there, the company analyzes the account to determine whether there are enough funds to support the transaction. If so, the company authorizes the purchase immediately and sells the requisite amount of BTC via bitcoin exchange Bitstamp.
Merchants receive their payment in local currency and, to MasterCard, Casares said, the transaction appears just like any other local transaction.
Casares went on to explain that the offering is different than the available prepaid options from Coincard and Cryptex, which need to be preloaded with bitcoins and that, he said, require users to manually convert bitcoins to local currency before purchase.
Explained Casares:
“This one is just like a debit card, because it debits from the wallet directly. You don’t have to be thinking about funding it and how much and when the conversion happens.”
Xapo users, by comparison, only need to move bitcoin from their cold storage vaults to their company-issued hot wallets when more funds are required.
Consumer focus
Though best known for its secure bitcoin vault storage product, Casares told CoinDesk that the Xapo Debit Card is consistent with his company’s mission of becoming a viable, consumer-focused bitcoin bank.
Said Casares:
“We’re not a wallet company or a payment company. We are a bitcoin wallet, we are a bitcoin bank. Consumers need convenience and that’s why we provide our MasterCard debit card and why we will keep adding products based on our customers want.”
Casares went on to stress Xapo’s commitment to consumers, stating that the company will never have merchant customers or offer merchant services.
The launch follows Xapo’s 13th March announcement that it raised $20m in funding from Benchmark, Fortress Investment Group and Ribbit Capital.
Images via Joshua Alvarez of The Hatch Agency