For the longest time, investors in cryptocurrency have been looking for ways to spend their Bitcoin, Ethereum, or other digital assets in their day-to-day lives, at a coffee shop, buying groceries, and so on and so forth.
The answer seemed simple: debit cards that used cryptocurrency. Indeed, over the years, the easiest way to spend digital assets in-store was through the many beta cards that allowed users to deposit Bitcoin and pay for any real-life item effectively using the BTC.
While there were many of these cards that worked, like the Xapo card, many projects in this class have been shut down due to a number of factors, including compliance issues and concerns about demand.
It seems, however, that crypto-enabled plastic is here to stay, with it being revealed that the $8 billion cryptocurrency giant Coinbase has become chummy with Visa, allowing it to expand its existing Coinbase Card operation, likely allowing millions to spend Bitcoin in their day-to-day lives.
Coinbase Becomes a Visa Principal Member
Announced in a blog post published Wednesday, Coinbase has become the ” first pure-play crypto company to be approved as a Visa principal member.” This means that moving forward, Coinbase’s crypto-enabled cards will involve better customer experience, “making it easier to spend cryptocurrency in everyday situations.” The announcement further stated:
This membership will enable us to offer more features for Coinbase Card customers; from additional services to support in more markets — all elements that will help to evolve and enrich the cryptocurrency payment experience.
Is Bitcoin Really Cut Out for Payments?
While many have embraced this news as extremely positive for crypto adoption, not everyone is sure that payments are meant to be Bitcoin’s forte.
Prominent cryptocurrency industry exec Dan Held, formerly of Uber and Blockchain and currently of Kraken, asked his followers “Why would I want to spend my crypto?” In response to the news regarding Coinbase.
Why would I want to spend my crypto? https://t.co/j9L9KA7Zom
— Dan Hedl (@danheld) February 19, 2020
Held, for some context, is a long-time believer that Satoshi Nakamoto created Bitcoin to be a backbone of the next financial system as a store of value, rather than it being but another payment system in a world of many.
He wrote in an extensive Twitter thread about this subject that “those pushing the ‘Bitcoin was first made for payments’ narrative insist on cherry-picking sentences from the white paper and forum posts to champion their perspective.”
This was echoed by Bloomberg editor Joe Weisenthal, a long-time commentator in the crypto industry. In response to news regarding Bakkt’s foray into crypto-enabled payments, the Bloomberg host said that with it being “incredibly easy to buy coffee these days with a range of payment systems,” he can’t “fathom how or why a crypto-based system will improve anything.”
I disagree. It is incredibly easy to buy coffee these days with a range of payment systems, and I can't fathom how or why a crypto-based system will improve anything. https://t.co/hEnc4NfqdK
— Joe Weisenthal (@TheStalwart) October 28, 2019
Tax Issues Remain
Even if there is a reason to use Bitcoin through debit rather than fiat through debit, there remain tax issues, especially in the U.S.
As it stands, there remains an issue in the U.S. and in other jurisdictions where the crypto that you spend buying a coffee, which means that it is actually sold, is subject to capital gains tax, both short-term and long-term.
This means that if you bought $5 worth of Bitcoin that grew to $8, then spent that $8 months later on a meal, you would be subject to pay whatever the capital gains are on the $3 profit.
Long story short, this means that when you’re spending Bitcoin via debit card or through more traditional digital payment rails, you are paying more than the ticket price of the product and you are required to arduously track all this.
There are moves being made to abolish the antiquity of the capital gains tax codes of the world in regards to crypto, but this is still something that has not been implemented.