Crypto wild man John McAfee and Coinbase both made big announcements about crypto debit cards this week. True to form, McAfee’s posits itself as functioning outside of the system to protect you from “the man”. And Coinbase’s just looks like another place for them to collect fees. We tracked down all the info we could on them.
Because it announced before these other two, we can use Crypterium as a way to compare the offerings from McAfee and Coinbase.
During the heady days of the late 2017 crypto boom, the race was on to put all your money into Bitcoin and to still be able to take out a few satoshis here and there for coffee. Crypterium debuted an NFC (non-financial counterparty) type of payment from crypto to cash directly from its app to “more than 42,000,000 merchants worldwide.” The problem here is it is banned in most U.S. states and spotty abroad. (More on that later.)
Here’s a video that tries to explain how it works:
Alrighty then, let’s look at these guys:
Let’s start with McAfee. He is offering a ‘Muricatastic Visa-branded Bitcoin card featuring his face over an American flag background with broken chains within the stripes in the front. A QR code usable for BTC deposits sits on that one part of the back of the card that always is impossible to read. The card’s lower left corner says “Freedom Lover.” The bottom features McAfee’s “Get your soul back” slogan.
McAfee says only the first 12,000 cards will have to suffer this design. The rest are described as “plain.” McAfee pretends that this account will not have a fiat account associated with it. The card can be used “anywhere,” and all users have to do is top it up with bitcoins. We’re guessing you do that using the QR code on the back of the card, but he doesn’t specify.
McAfee later clarified, “Sorry – ‘Credit Card’ was a misnomer. More like a debit card. You load it with Bitcoin then use it anywhere. We convert to local currencies.”
[Writer’s note: McAfee and I were neighbors in the Caribbean for a while. I would see him at the video store. He is—and I can’t stress this enough—the human equivalent of his eponymous and spammy software. He would pop up out of nowhere and warn me that there were snipers in the woods. Then I wouldn’t see him for weeks and he’d do the same thing again.]
The moral of the story is that John McAfee values security. But he also likes putting his name on things. I’d like to think that he would find some kind of magic, low-fee situation but without any hard numbers, I can’t really tell what that should be. In a super idealized version of this, the card would work on the back of an exchange. They would trade your crypto for you every time you made a purchase. Your crypto card would have to have purchasing power equal to the crypto you had in the account. In that sense, it would work a bit like a Visa prepaid card.
Second we turn to Coinbase, who will only roll out their card in the U.K. We’ve written about this before, but the U.K. has an exceptionally brisk banking system. Some might say it’s easier than what we in the U.S. expect out of Venmo. You can send someone money and it goes directly into their account. You could reimburse someone for gas money in the time it takes to fill a tank and pay with a card.
But that’s for fiat in your account. Coinbase does hold fiat money for your trading account but the card they announced won’t require a fiat balance to work.
“Coinbase Card is powered by customers’ Coinbase account crypto balances, giving them the ability to pay in-store and online using bitcoin, ethereum, litecoin, and more. Customers can use their card in millions of locations around the world, making payments through contactless, Chip and PIN, as well as cash withdrawals from ATMs. When customers use their Coinbase Card, we instantly convert crypto to fiat currency, such as GBP, which is used to complete the purchase.”
Reportedly, Coinbase will offer app support for managing various cryptocurrencies. The McAfee wallet only seems to offer BTC support.
“To help customers manage their spend, we’ve also launched the Coinbase Card app, which enables customers to select which of their crypto wallets they will use to fund their Coinbase Card spending. Coinbase Card supports all crypto assets available to buy and sell on the Coinbase platform, meaning they can pay for a meal with bitcoin, or use ethereum to fund their train ticket home.”
This is starting to look like the cryptofuture we were promised—only it’s brought to you by the current banking system, not in spite of it.
Coinbase doesn’t mention any fees associated with purchase, but does note that the first 1,000 to sign up won’t have to pay the £4.95 card issuance fee.
The transactions are managed by a Cambridge-based outfit called Paysafe Financial Services. They deal with a who’s who of shady banking practices including Western Union style transfers, “affiliate marketing” (*cough* pyramid-shaped schemes), prepaid cards, and something called Skrill, which can handle internet gambling in New Jersey. Skrill also offers a sort of high-fee Venmo.
Based on this, it’s hard to imagine that the fees would be less than 1.45% to send, 3.99% for currency exchange, and £4.76 (€5.50) for bank transfers and Visa card transfers at 7.50%.
What we’re ignoring so far is that we know exactly what Coinbase already charges for the joy of letting them hold your money. If I wanted to sell some bitcoin today to put a $15 on my credit card to buy a pizza then I would pay $1.49 in fees. That’s 10% *on top of* the amount I wanted to sell. Even once it goes on some magic payment processing card that Coinbase hasn’t spelled out yet, I get to pay more fees to the merchant so that they can pay their bank later.
Crypterium (just for argument’s sake)
The long- teased Crypterium card is still coming, we’re told. They swear that it will work just as easily at ATMs and gas pumps. “Make a space in your wallet for your Crypterium Card,” they promise when you sign up. “You won’t go back to conservative ways of paying.” Even when you download the app, they tell you to get ready to pay your taxes with crypto.
Only when I get that far they say, “Crypterium services are not available in the selected country.” Which is weird because my “country” is the U.S. IBut it was only after I put in my state (New York) that I got locked out. New York has a Bitlicense law that sometimes means that unscrupulous trading platforms like Bittrex will boot you off with one day’s notice.
Okay, but maybe they will find a way for it to work somewhere. But how?
Crypterium founder Austin Kimm put it this way to TechRebulic:
“If you were doing a transaction in Bitcoin today, you’ll pay a Bitcoin fee, your transaction fee. It’s $5 or whatever it is for a transaction. That’s $5 whether you did a $5 Starbucks or $5 if you do $1 million Starbucks. Now, it’s still $5. So for us, what we are able to do, we scrape all of those transactions into one transaction, and we use something called the master wallet that scrapes everything into one transaction. So instead of doing 5,000 $5 transactions, we do one $25,000 transaction and we still only pay one fee. And that’s how we effectively eliminate the fee out of the process as far as the customer is concerned.
In a hypothetical $10 Starbucks purchase, Kimm says that Crypterium will handle everything behind the scenes so that you aren’t left trying to see if a place in your neighborhood will accept bitcoin.
“We pay the bank effectively the $10, but then we buy and sell that cryptocurrency behind the scenes whilst all of that transaction is taking place. And you as an individual just paid with cryptocurrency and Starbucks just received $10.”
At least in theory it would cost the Crypterium customer $10 to spend $10 at the store, j. Just like a bank. According to Crypterium’s available information, they charge the merchant a fee of 0.5%. In other words, Or $0.05 for that $10 transaction.
Crypterium’s system will cost the user the same as a regular card-based transaction. That means it takes place across the existing payments ecosystem. You could complete this transaction wordlessly.
The deeper we get into our crypto future, the quicker we’re going to hope for someone to emerge as the real winner. It’s not the singular best solution that we’ll go with. More likely we will all move toward a system that works.
The problem is, we’re mostly okay with our high-fee credit card system. We would have better luck trying to get our existing banks (fiat and even crypto) to move toward a system like they have in Norway where only 10% of transactions are cash-based. In Sweden, 99% of all transactions are cash-less and little kids carry their own cards to get penny candy at the store. The government even has its own eKrona central-backed cryptocurrency. Locals say these chip and PIN systems are faster, more reliable, and lead to less robberies than cash.
If Crypterium could create an adequate use-case and a consortium of banks could sign on, then that would be the real winner. McAfee’s card is too opaque at present and Coinbase’s partners all exhibit rent-seeking behavior in their past ventures.
Note that those are solutions that work in countries where the private sector worksed together. This is not about a single firm blowing away the competition. It’s about groups deciding what is best for their firms and their customers. It’s unlikely that a madcapwild man like John McAfee or a smaller system from Coinbase in the U.K. will solve all of our transaction troubles. Just at the world will need to tackle environmental issues as a coalition of government, someday soon we will need to put a cap on transaction fees.