One of the big problems facing the crypto sector is working out exactly where that all-important game-changing big boost to wider adoption will come from. As the basic idea behind the original crypto coin Bitcoin was to set up an entirely separate way of doing things, it might seem counterintuitive to try and find the ‘way in’ for digital coins in the existing economic consumer structure.
However, the fact that so many transactions are now digital anyway in terms of card purchases as opposed to cash changing hands means that there is a possible route for crypto to gain traction very quickly. At the moment, crypto purchases with credit cards are frequent but small, but this could be all set to change. This will be of interest to CFD traders who favor crypto based forex markets as it offers a potential for the wider adoption by the general public for digital coins that has long been seen as the holy grail of the sector as a whole.
Restrictions placed by banks on holders of credit cards have several major ramifications for crypto, and French-based cryptocurrency exchange Coinhouse has been looking in detail at the situation as it currently stands. Marketing manager at the exchange Brian O’Hagan recently explained: “You tend to have a lot more people bought with bank transfers, for thousands of euros, but when it’s between EUR 200 and EUR 400, most purchases will be with credit cards.”
“Those are the majority – they will invest more frequently”, he added while also pointing out that credit card users still face challenges when attempting to buy cryptocurrencies. O’Hagan said that MasterCard and Visa “are not very nice” when it comes to processing credit card payments for crypto purchases and singled out MasterCard which he claimed blocked exchanges based on the fact that it’s crypto. O’Hagan also added that some banks do not allow their clients to purchase crypto.
The lack of regulation and licensing regimes are the main stumbling blocks, O’Hagan believes, because this means banks find it hard to know which exchanges are trustworthy. “For an exchange, it’s extremely important to diversify in the sense that they should have as many payment processors as possible, like PayPal, Amex or Visa”, O’Hagan suggested. He also focused on the importance of a clear regulatory framework at a national or supranational level.
O’Hagan hopes the framework which France is currently working on will lead the EU to adopt a system which will provide the solution to legitimizing crypto exchanges and removing obstacles that are currently in place which dissuade people from making digital asset purchases. “What this is going to change for us, short term, is that we’ll be able to talk to different, potentially problematic banks or ad networks and show them a license to prove we’re regulated”, he said. “But I don’t think Europe is going to regulate crypto straight away. There’s going to be elections, they will commission a parliament, and probably work over the next two years to build a unified regulatory framework for the whole of Europe – and I think that’s going to be quite drastic.”
How the major card providers MasterCard and Visa will react to any such changes is still open to question. Large scale high-level institutional adoption of cryptocurrencies could lead to a sudden rush to be seen as the first to embrace the changes and offer customers new services that would be seen as both progressive and transformational. O’Hagan thinks that the major providers will investigate possible blockchain and crypto processes and that major changes will come sooner rather than later. “I wouldn’t be surprised if by the end of next year we see major acquisitions from either Visa or MasterCard in the crypto and blockchain space”, he said.
Other voices have a slightly more cautious tone for the credit card providers. Top Wall Street analyst Lisa Ellis, who is an expert on the payments industry, recently suggested that Visa, Mastercard and PayPal must realize that cryptocurrencies “are potentially disruptive to private payment systems”. She went on to say that the companies should not be ignored because progress is being made to address shortcomings and use cases that are compelling are beginning to emerge. according to her.
Of course, it isn’t just a one-way street for adoption in which the onus lies totally with the credit card providers themselves. The big exchanges also have to be willing to get on board, and so far, Binance, Coinbase, eToro, KuCoin and Bitstamp all accept credit cards as a payment option. In terms of crypto forex trading, the more transactions there are, the greater volume of trades most likely follow. Activity is the lifeblood of CFD based trading and so an increase, whichever direction it comes from, is to be welcomed.
As to the longer term future, it is almost inevitable that credit card providers will become more open to adopting blockchain tech and cryptocurrencies in one way or another. As with almost everything else in the industry, which it must be remembered is only a decade old, things can move surprisingly fast when the right circumstances align.