Dive Brief:
- Visa is partnering with cryptocurrency startup BlockFi to launch a credit card, expected in the first quarter of 2021, that will give users 1.5% of their fiat purchases back in Bitcoin.
- The card will carry a $200 annual fee, but BlockFi is offering customers who spend at least $3,000 on the card in the first three months a stipend of $250.
- The effort marks a further expansion into the crypto space by Visa. The card network in April partnered with another startup, Fold, to offer a debit card that credits users in Bitcoin up to 10% of the cash purchases they make on the card.
Dive Insight:
Tuesday's BlockFi announcement comes a day after Bitcoin closed at an all-time high of $19,850, surpassing a spike in value that peaked in 2017. The digital currency's worth has surged 167% in 2020 — despite crashing to below $4,000 in March at the start of the coronavirus pandemic. Bitcoin's rise may intrigue more users to explore crypto, so a launch soon may be a boon for business.
BlockFi said the cards would initially be available only in the U.S. but encouraged customers overseas to join a waitlist, which will be made public in January, before cards begin shipping in the spring.
The BlockFi announcement also follows signals this year that mainstream companies are becoming more accepting of cryptocurrency. PayPal in October said it would soon let U.S. account holders buy, sell and hold cryptocurrency in their digital wallets. JPMorgan Chase this spring extended banking services to cryptocurrency exchanges Coinbase and Gemini.
The BlockFi and Fold partnerships — part of Visa's Fast Track program that encourages fintechs to work with the payment network — may also indicate a softening from Visa, too, on crypto. Coinbase in 2018 accused the network — and its chief rival, Mastercard — of changing the crypto exchange's merchant classification code, such that banks would treat card purchases on Coinbase as cash advances, passing on hefty fees to users. Customers then took their complaints about the fees to social media.
Visa and Mastercard said there was no code change. Rather, they clarified to banks which code they should've been using all along for transactions at cryptocurrency exchanges, they said, according to Bloomberg. It's up to banks, not networks, to decide whether to impose fees, Mastercard spokesman Seth Eisen said at the time.
Visa and Coinbase appear to have reconciled. The outlets announced a co-branded Coinbase debit card in February that would allow users to spend Bitcoin.
But spending Bitcoin likely isn't the primary interest of card users, Visa's partners said.
"If people don't understand Bitcoin as money yet, they certainly will understand it as a better reward," Fold CEO Will Reeves told Bloomberg in April.
"A lot of the debit cards that exist in the crypto ecosystem are the kind that are oriented around this idea of spending your crypto, which at least clients at BlockFi are not interested in doing," BlockFi CEO Zac Prince told CoinDesk on Tuesday. "They want to hold their Bitcoin and earn a yield on it."
It remains to be seen whether Bitcoin's relative volatility could be a pain point. BlockFi is working on functionality that would let users pay down their BlockFi credit card debt with crypto. For now, though, Prince said BlockFi is encouraging customers to use the card for everyday spending, not for creating debt.
Prince didn't give CoinDesk an exact credit limit available on the card, but said he expects it to vary from $5,000 to $25,000, depending on the user's creditworthiness.
Evolve Bank & Trust will issue BlockFi's Visa card.
