In under 4 years, Coinbase has become a respected powerhouse in the digital currency space. From humble beginnings at Silicon Valley venture capital accelerator Y Combinator (YC seeded Dropbox, Airbnb, Stripe, Reddit, Weebly and many more), Coinbase is all things to all bitcoin users. After establishing an account individuals can integrate bank accounts to purchase bitcoin, set up trading accounts and more. Merchant accounts have access to applications that make accepting bitcoin and converting to local currencies a breeze.
Now a shifty move and a play on words tells us Coinbase may be distancing itself, just a little, from bitcoin.
Coinbase introduced the Shift Card on November 20, 2015: “Today, we’re excited to introduce the first US-issued bitcoin debit card, the Shift Card.” Except it is not a bitcoin debit card. Coinbase continues, “Buying gas at a local gas station or groceries at a neighborhood grocery store with bitcoin has not been possible in most cities in the U.S. Thanks to Shift Payments, it’s now possible to use bitcoin to buy gas, groceries, and much more.” Except you’re not using bitcoin to pay for gas, groceries and much more.
Coinbase has simply introduced an effortless way for its account holders to unload their bitcoin for US Dollars which are then used to backstop a VISA DEBIT CARD. Plain and simple.
When a USD purchase is made with the Shift Card, Coinbase instantly moves the equivalent bitcoin from the Shift Card user’s bitcoin wallet to the Shift Payments bitcoin wallet. Coinbase then converts the bitcoin to USD for Shift Payments. For the time being, Coinbase does not charge Shift Payments a USD transaction fee but notes: “In the future, we may charge a fee to Shift for the conversion of bitcoin, which Shift may pass to you.” Shift Payments backs the Shift Card VISA debit card with USD, not bitcoin and merchants receive USD, not bitcoin.
From the Coinbase blog:
Let’s look at a typical Coinbase/Shift Card transaction. Coinbase user, with Shift Card in hand, walks into Macy’s and asks if they accept VISA debit cards. Macy’s responds, yes of course we do!
Let’s look at a typical Coinbase Bitcoin transaction. Coinbase user, with mobile Coinbase bitcoin wallet in hand, walks into Macy’s and asks if they accept bitcoin. Macy’s responds, what’s bitcoin?
Using the Shift Card during a bull trend can be costly for anyone wishing to replenish spent bitcoin. Users of the Shift Card should be cognizant of the bitcoin price whenever they make a purchase. If you used the Shift Card on December 1, 2015 to make a $360.00 purchase, you would have had 1 bitcoin transferred out of your Coinbase bitcoin wallet. If you decided to replenish your Coinbase bitcoin wallet account 5 days later on December 6, 2015, you would have had to cough up $394.00, $34.00 or almost 10% more. Worse, if you decided to replenish that spent bitcoin a short 2 weeks later, on December 15, 2015, you would have choked at the staggering bitcoin price increase to $453.00, nearly $100.00 more than when you made your original Shift Card purchase of $360.00. What does it mean? In this example it means you paid $453.00 for something worth $360.00. None of these numbers include the additional fees tacked on by Coinbase when you use their services to buy bitcoin or the impending USD conversions fees. Granted, the ascending bitcoin price demonstrates how the Shift Card user could be disadvantaged and a declining trend would favor that same user, but that’s not the point.
Bitcoin adoption rates for merchants are anemic. To even suggest the Shift Card is good for bitcoin is outrageous. The Shift Card itself does not display a bitcoin logo or anything to indicate bitcoin may be part of the transaction. When the Shift Card is used merchants don’t see bitcoin, they don’t hear bitcoin, they don’t learn about bitcoin. Further, as the merchant didn’t receive any bitcoin, they cannot participate in expanding the bitcoin economy by using it to pay their suppliers, giving bitcoin bonuses to employees or paying wages with Bitwage, requiring and purchasing storage devices like Ledger or KeepKey. It is this cycle that will promote adoption and expand the bitcoin ecosystem.
Shift Payments says the Shift Card works like any debit card today. That’s because the Shift Card IS JUST a US Dollar debit card. Nothing more.
What many proponents of bitcoin don’t realize is that the easiest way to on-ramp a company is to get them to exchange goods or services for bitcoin. This is effortless compared to the cumbersome initialization process required for account setup necessary to buy bitcoin from exchanges.
Bitcoin, the community and the ecosystem are not benefactors of this fake bitcoin debit card and Coinbase is losing its luster by trying to pass it off as such. It appears that soon the only benefactors will be Coinbase, Shift and VISA when the USD transactions fees kick in and Shift Payments passes them on to the cardholders.
Here are some suggestions on how to improve this Shift VISA Debit Card:
- Print the bitcoin logo on the card. Yes, I know the VISA legal team would refuse to allow its brand to be polluted by bitcoin branding. This would at least start the conversation with merchants about bitcoin. A little step in the right direction.
- Put a QR code on the back of the card with a real-time popup “Coinbase Sell Price” notification and trend indicator so that the cardholder sees what they are paying in real-time BEFORE they make their purchases, not AFTER the purchase has been completed.
Coinbase is a great asset to bitcoin and bitcoin users. The Shift Card is not.