Singaporean startup TenX has introduced a Visa card backed by cryptocurrency wallets. This card aims to bring bitcoin into the real world. Will it work?
Although cryptocurrencies can be used for financial transactions, they exist in a world of their own- the virtual world.
These virtual coins - bitcoin, litecoin, ethereum and the rest - aren't "real", as some would say. They have no physical presence. You can't insert a card into the ATM and have the machine pour crisp bitcoin notes into your open palms. And you can hardly use them to pay for goods and services in physical shops and stores.
Well, this is generally the assumed condition until Bloomberg published a story about TenX, a Singapore-based startup which "takes bitcoin into the real world with Visa." The last part (or word) caught the eyes of many people. Visa is a financial giant who powers financial transactions all over the world. If they are in a partnership with TenX then they must be the real deal, right? Right.
But how does TenX intend to make bitcoin physical?
TenX will offer its customers a Visa card which will be tied to a digital currency wallet. With this arrangement, customers can buy stuff at restaurants or gift shops with their TenX card, backed by bitcoin or other digital assets. Just one swipe of the card and you're good to go with your groceries.
“When the user spends the cryptocurrency, we have to instantly switch these currencies to fiat money and pay to Visa straight away. It’s a lot of pathways", TenX co-founder Julian Hosp explained in an interview.
The transactions are processed immediately, and TenX says it doesn't impose any charges on top of the conversion fee that is set by cryptocurrency exchanges, which usually is 0.15 to 0.2 per cent. The card has a yearly limit of $2,000. If you want to spend more, you'll need to go through an identity verification process.
Many people want the card. Over 10,000 have ordered for it already. TenX currently processes about $100,000 of transactions a month. By the end of 2018, it’s targeting $100 million in monthly transactions and a million users. But is this possible?
In a way, the idea makes sense. With the card, you will be spending your cryptocoin directly just like any physical currency, although a lot of conversions will have to be made somewhere along the way. However, this is not the first time someone has tried piggy-back on existing card networks.
Three years ago, bitcoin storage firm, Xapo, introduced a Mastercard tied to its digital currency wallets. Mastercard immediately denounced the partnership and Xapo then created a bitcoin-backed debit card that works with Visa. Also, San Francisco's Coinbase has Shift Card, which works on Visa as well and is backed by their cryptocoin wallet. These cards use the same modus operandi as TenX's Visa card.
Unfortunately, none of these cards seem to have caught on beyond a handful of users. At their time, bitcoin isn't as big as it is now and cryptocurrencies were yet to catch on. So it wouldn't look wise funding a card with bitcoin when you can easily apply for a credit or debit card.
Moreover, card companies aren't as strong as you think they'd be. Although Visa might allow them to use their network, they won't hesitate to cut them off if they sense any threats to their operations. Quite noticeably too, Visa has been mum about TenX and has distanced itself from any bitcoin marketing activities.
In addition to this, TenX is currently embroiled in some controversies. The firm's shares fell hard on July 8- from around $80 to $1. There are no updates about its intention of securing a banking license, and incorrectly listing Ethereum co-founder Vitalik Buterin as its investor is not helping matters. Apart from these, TenX, like other startups with ICOs, has been accused of withholding valuable information about its operation with which users can fully assess it.
But it's not all gloom and doom for TenX. The ever growing popularity of bitcoin works to its advantage. The more people accept bitcoin, the more people will embrace TenX. You can safely say that its future is tied to bitcoin's. If bitcoin performs well, it will have a high success rate. If not, it will probably crumble.
Also, if TenX expands, and provide support for the vast majority of cryptocurrency wallets and cryptocurrencies, it has a good chance of survival, in spite of the apparent failures of Xapo and Shift Card. The more customers you have, the more likely you'll succeed. In a way, the scenario can be likened to the case of iOS versus Android. iOS is restricted to iProducts while Android is open source and can be accessed by everybody. Now, Android runs on more phones and devices than iOS.
So, some things seem not to be on the right path for TenX at the moment but only time and bitcoin will tell if their idea will work out in the long-term or not.