A crypto card aspires to overcome the trappings of the big card brands
Tanshul Kumar insists the problem of merchants not accepting cryptocurrency for payments carries its own solution: Customers convert their cryptocurrencies right before the money hits the merchant's account.
In yet another twist on the idea of a cryptocurrency debit card, MoxyOne has developed its own network as a way to address the setbacks some have faced in relying on Visa and Mastercard. Merchants would still have to sign up with MoxyOne, but they would never see or touch anything but their local fiat currency.
Issuing its own debit card and using liquidity providers could give MoxyOne more control over its network, and possibly avoid pressure from card networks and other problems cryptocurrencies have had when trying to use debit cards to convert bitcoin to fiat currency at the point of sale by circumventing traditional financial companies.
The card networks have taken a cool posture toward using debit cards for cryptocurrency payments. The list of crypto debit cards is relatively small, and even the cards that do exist are not universally accepted.
Visa recently banned some Wavecrest cards from using Visa debit cards in this manner, though Visa said the ban was due to noncompliance with card network rules, rather than being related to cryptocurrency debit as a payments model. Three of Wavecrest's prepaid cryptocurrency payment providers — BitPay, Cryptopay and Bitwala — were suspended, meaning they could not be used for payments, putting a damper on an already slow cryptocurrency payment market.
In some cases, banks in the U.S. and U.K. have banned the use of credit cards to buy cryptocurrency, which isn't the same issue as barring the conversion of cryptocurrencies onto debit cards, but still has the effect of depressing the amount of cryptocurrency in the open market that's usable for retail payments.
MoxyOne's model relies on "just in time funding," or a method of automatically transferring funds at the time of a payment, thus avoiding a preloaded individual accounts and acting as an alternative to the traditional financial services market, which has at times taken a hard stance against cryptocurrencies which has delayed the development of a payments market.
"All the merchant sees is a successful or unsuccessful transaction," said Kumar, co-founder and lead front-end developer for MoxyOne, an Australian company that has developed a middleware between cryptocurrencies and the fiat currencies that merchants are more accustomed to using. "The merchant doesn't have to deal with any cryptocurrency or anything like that whatsoever."
MoxyOne will rely on liquidity providers, which the company is recruiting as part of its ICO investment process. These "buffers" will exchange tokens for fiat currency for the amount of a payment. The merchant is unaware of the cryptocurrency origin of the payment in this model.
MoxyOne will provide debit cards for its own users, called SPEND token holders, and other cryptocurrency companies to use on a white-label basis. MoxyOne's revenue will derive from token sales and fees in MoxyOne's native token for transactions.
"Most cryptocurrencies don't have a literal use," Kumar said. "We want to bring it mainstream."
MoxyOne did not comment on the Visa bans or other debit card conversion services beyond contending its "just in time" funding provides more control than the prepaid accounts that support most of the other crypto-to-fiat cards.
MoxyOne's ICO will run until April 14, and is listed on the cryptocurrency service exchange COBINHOOD, which is underwriting the token sale. MoxyOne manages a verification process to ensure compliance with local laws and anti-money-laundering rules for its debit card and wallet holders, and liquidity providers. There are 50 million MoxyOne tokens available, and in an attempt to manage volatility, the company won't issue new tokens.
Beyond having "currency" as part of their name, cryptocurrencies have normally been anything but a currency, serving mostly as investment assets or providing a technology base for entirely unrelated purposes.
Other options to convert at the point of sale include Coinbase, which provides a service that enables cryptocurrency exchanges to fiat currency for payments, Monaco and TenX.
The model will have challenges, particularly in the U.S. given cryptocurrency's status as more of an investment vehicle more than a payment type and the history of exchange failures, said Tim Sloane, vice president of payments innovation at Mercator.
"A better approach is to enable the exchange of crypto into U.S. dollars placed into existing bank accounts," Sloane said.