The digital currency bitcoin has been an object of fascination, skepticism and confusion. That confusion (What is it? How do you use it? What’s it worth? Who accepts it?) has been a huge hurdle to more widespread acceptance and use of bitcoin.
In an effort to help the currency make that jump into the mainstream, last week bitcoin storage company Xapo launched a debit card. “In the spirit of bringing bitcoin to the masses, we are proud to announce the Xapo Debit Card – the first bitcoin debit card that allows users to spend bitcoins just like cash all over the world, right from their Xapo Wallet,” the company declared on its blog.
In theory, it sounds like an interesting idea. By releasing a debit card, Xapo lets bitcoin enthusiasts move from the realm of online purchases to actually buying dresses and cereal in brick and mortar stores. On a practical level, it works like this: every time someone makes a purchase with their Xapo Debit Card, a certain amount of bitcoin the cardholder already has in their account is sold off in order to cover the purchase. How much bitcoin has to be sold depends on the current value of bitcoin and what currency the purchase is being made with.
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When this story was initially reported by Gigaom.com, Xapo claimed that it had inked a deal with MasterCard. That would have been a major development because it would have meant that bitcoin could be used wherever MasterCard is accepted – which is a lot of places worldwide. The story was updated with the news that Xapo actually had not secured any sort of partnership with MasterCard.
Observers quickly noted other problems with the new Xapo Debit Card, which the company said would be available in two months. One blogger, Dan Seitz, noted the absence of any fee information, which is obviously a big problem for any consumer thinking about getting a debit card. Seitz also noted the issue of bitcoin’s fluctuation in value. “Considering bitcoin’s tendency to whipsaw wildly in value, there’s a very real chance that you might not be able to cover some purchases,” writes Seitz.
