The main advantage of using bitcoin when compared to traditional payment methods is its confidentiality. Upon the bitcoin transaction its record on blockchain becomes invariable and public, but is not linked to any particular individual.
However, the major problem associated with bitcoin still remains a limited number of vendors and services that accept it as payment. That is why many crypto-companies introduce their own debit cards that accept bitcoin deposits and convert them into fiat, like, for example, bitcoin to USD, for further use in traditional stores.
Nevertheless, the tricky part with bitcoin cards is that they tend to require the same level of financial disclosure as traditional financial institutions.
Although these cards have an advantage over banks that can close account anytime on any ground, especially, under pressure from the government, their financial privacy, in fact, does not exist.
Let’s take a closer look at the eight most prominent debit card issuers, supporting bitcoin in America and Europe.
Bitcoin debit cards in USA
Coinbase offers the debit card named Shift Card that takes bitcoins out of Coinbase wallet for every transaction.
It is very convenient system, since customers do not need to have two separate wallets – bitcoin and card one. Moreover, there is no necessity to credit card’s balance before making a transaction, the whole process can be carried out with the Shift Card.
In this context, the Shift falls under description of the bitcoin debit card; however it is not available in all US states. When it comes to confidentiality, Coinbase fully meets the regulator’s requirements and asks its customers to complete KYC procedure.
BitPay is the only one to provide bitcoin card accessible across the United States. Unlike the Coinbase product, as well as any other option included in this list, the BitPay card is a prepaid one with the balance in traditional currency once converted from bitcoin.
BitPay requires its clients to go through identification process before start using card. However, no personal identity documents should be provided, BitPay users have to enter their social security number only.
Bitcoin debit cards in Europe
Xapo is considered one of the major cryptocurrency cards in Europe and beyond its borders that gained its popularity after being used for Uber service in Argentina. Currently, the card is unavailable for the large number of countries, notably the United States. It also requires full disclosure of financial information.
The product manager at Xapo Anni Rautio thinks that financial anonymity is impossible for the bitcoin debit card, unless it is used for the prepaid debit card.
“As long as debit cards – bitcoin or other – are related to long-term players in the market, such as Visa or MasterCard, anonymity at 100% is impossible. The only option that comes to my mind concerning an anonymous debit card is prepaid/pre-loaded debit cards that you can buy at places like CVS. They function, however, more like gift cards and those, in general, are not convenient in the long run.”
Rautio noted that the most important aspect of these cards is not supreme confidentiality, but rather maximum convenience.
“Xapo’s main goal is the integration of bitcoin in everyday life for people around the world. This will happen only if we make bitcoin accessible, easy to understand and familiar enough so that large-scale adoption of bitcoin can continue.”
Another card, used by Uber in Argentina, is SatoshiTango that requires full identification of financial data. It is available in most countries, except the United States.
CEO at SatoshiTango Matias Bari explained that general identification requirements are still applied, although they are less strict than those imposed by the banks.
“In order to open an account at SatoshiTango you need to confirm your identity with a proof of identification and residential address. You don’t need the same level of verification as the bank account owners, but you can’t request a prepaid card or even buy and sell bitcoins without letting us know who you are.”
One more bitcoin card issuer Bitwala that became known for its option to pay a number of different bills with bitcoins, is unavailable in US as well. The integration with the exchange service ShapeShift makes it different from other bitcoin cards. Consequently, the client can credit his card with other cryptocurrencies, convert bitcoin to USD and further cash it out .
Jeff Gallas of Bitwala clarified that their card requires standard identification forms, and that all cards existing in the market most likely demand the same.
“As far as we know, all bitcoin debit cards in the market ask for some sort of identification. With regard to the Bitwala card we have to meet certain requirements that include verification of customer’s details.”
However, in the near future Bitwala will be able to offer solutions for those, who do not have appropriate identification forms issued by the government.
It is a typical European card, which is not accessible for the US customers, and requires the same forms of identification for unlimited use. The verification process is necessary to allow the unrestricted access to CryptoPay.
However, they have some opportunities for unverified cards. Thus, the customer does not have to provide documents, if he owns the card for a short time that is less than its validity period.
According to the CryptoPay CEO George Basiladze:
“If a debit card provider offers completely unlimited and anonymous cards, it means that the operator either violates the law, or is lying, therefore, users should avoid it.”
Wirex, formerly known as E-coin, just as CryptoPay, in addition to the full card service with identity procedure, allows its clients to stay unverified for some time. The founders of Wirex Dmitry and George believe that privacy and anonymity of bitcoin cards is possible under one condition – the acceptance of the lower debit card limits.
“At the moment, it is technically possible for bitcoin debit card to be private and anonymous. As long as the customer is satisfied with the limits of short-term card, there is no need to provide any documents.”
According to the Wirex founders, the world of completely private bitcoin cards may soon come to an end, forcing clients to comply with the identification requirements.
“The regulation of the prepaid cards becomes increasingly stricter. For instance, in the near future the limits for the unverified cardholders will be reduced. There have been a number of attempts to establish link between prepaid card and fraud or other unlawful activities. Therefore, there is no reason to expect that the anonymous debit cards will exist on platforms like Visa and MasterCard shortly.”
The best solution
Even if it seems that there is no ideal solution for preserving the bitcoin cards user’s privacy, a reasonable compromise can be still reached. Those who want to maintain their confidentiality can get card that does not require verification or the one having limits on operations, or even purchase several unverified cards, switching every time to a new one.
Certainly, some customers will choose not to have any limits on the card’s validity period, while looking for more privacy. There is another option for those who have two or more nationalities – get verified card using one citizenship and hold it in the national currency of the country, where the customer actually lives and works. It may help to keep the financial activity visible mainly to those authorities that have the minimum interaction with citizen, ensuring that neither party knows too much.