The crypto cards are coming

One of the biggest questions about cryptocurrency is whether people will actually pay for anything with these digital assets. Mastercard's new crypto card product with Bakkt will bring that question to the fore by making it easier for big banks and other financial institutions in its network to issue cryptocurrency credit and debit cards.

Mastercard hopes to bring some much-needed scale to the world of crypto payments. Payments volume using crypto is still tiny compared to card networks like Visa or Mastercard, but crypto advocates have long envisioned crypto payment networks that don't rely on central companies like the card networks. The partnership seems to address the former while trampling the latter by making a much bigger market for crypto payments on Mastercard's rails.

• Bakkt would hold cryptocurrency for users in a wallet and convert it to currency that a merchant wants, and then send it via Mastercard's network.
• That means consumers could make payments in bitcoin or earn rewards in bitcoin. It also means that merchants can more easily accept crypto payments.

Others see crypto cards as the future too, with a number of crypto companies also betting on their potential.

• BlockFi said it has more than 50,000 users of its BlockFi Rewards Visa credit card, which offers crypto rewards (in every state except New York, where it is not available). The average user is on track to spend an average of $30,000 per year, which is much higher than a traditional credit card, BlockFi said. The company said it has given out 120 bitcoin in rewards so far.
• Coinbase offers a Visa debit card that lets users spend any crypto asset they hold on Coinbase and earn rewards of up to 4% back. SoFi, Gemini, Venmo and Brex also offer crypto card options.

But are consumers ready to pay with crypto? There are still unanswered questions about whether it makes all that much sense.

• The wild volatility of crypto assets such as bitcoin makes using them for payments tricky because of the fluctuation in value. Stablecoins may eventually offer some respite from that, but they have some of their own questions. The largest stablecoin, Tether, has been scrutinized over whether it is truly backed one-for-one by liquid assets — as it has claimed. If it isn't, it could collapse if there is a "run on the bank" or other market instability. And U.S. regulators are set to release a report that could regulate stablecoins.
• There are also tax implications. For example, people using crypto for payments could be required to pay taxes on the cryptocurrency that they use for payments if that crypto had gone up in value.
• But paying with a crypto card is at least theoretically easier than paying direct with crypto from a crypto wallet.

Either way, this could draw more consumer and merchant interest. Just like bitcoin ETFs, crypto credit and debit cards make crypto accessible.

• The Mastercard deal would enable merchants to more easily integrate crypto offerings, even for those that have no experience with crypto. That's because Bakkt is essentially converting all crypto to fiat for the merchants.
• And even people who wouldn't want to buy crypto could potentially earn crypto rewards for using one of the Mastercard cards. So ultimately, people might not end up paying for things in crypto, but could still see some of the upsides of the currencies.

— Tomio Geron

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What was your first fintech or tech job?

After graduating from MIT with a degree in electrical engineering and computer science, I took a job with UBS in Zurich to help modernize their Swiss Private Banking & Asset Management business. As one of eight MIT graduates, we helped to redefine their operating model and technology architecture. As part of this initiative, I also built the new Order Management System, a new Portfolio Management System module, based on 4GL programming languages and the client-server designs.

Need to know

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A MESSAGE FROM APEX FINTECH SOLUTIONS

It's that adaptability that keeps clients loyal to Apex, and helps them grow in the highly competitive and turbulent world of democratized finance. As of June 2021, 11 million of Apex's customers were aged 18-40 — but as others start to see the potential in this new and growing space, they're starting to jump in.

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Data point

$795,000: The amount Coinbase spent on lobbying in Washington, D.C. in the third quarter alone.