Cryptocurrency has been one of the buzzworthy topics in finance over the last decade, with its promising potential to revolutionize banking systems. Basically, it has transformed the way we think about money and transactions, offering a more decentralized and secure option for payments, mainly in games and later, in various transactions.
Yet, despite their popularity, wide-scale adoption remains a potential but never actual. This inability of cryptocurrency to be adopted as a mainstream currency may be due to a lot of factors that include geographical regulations, security concerns, and volatility.
To facilitate its acceptance as a mainstream currency, credit card companies are now integrating cryptocurrency into their credit cards. Below, let us all explore crypto-backed credit cards and determine whether they are the missing link for cryptocurrency to be adopted as a mainstream currency.
What Are Crypto-Backed Credit Cards?
Crypto-backed credit cards are financial tools that let a consumer access a credit line based on their crypto holdings without requiring them to sell any of it. In simpler terms, when a user makes a purchase, the crypto card provider typically fronts the transaction in fiat currency while utilizing their cryptocurrency assets as collateral in case they cannot repay the borrowed amount.
A great example of this crypto-backed credit card is Nexo in partnership with Mastercard and DiPocket, giving its users access to cryptocurrency-powered liquidity to almost 92 million merchant sites worldwide. This type of credit card is different from the usual crypto credit cards often featured in most review sites, which were specifically made for trading and investing.
Although it’s difficult to determine definitively the best crypto credit card, it is clear that each card offers unique features that cater to different user needs. Accordingly, if ever you need to compare each card’s pros and cons, take into account the comparisons made on review sites and weigh which one works best according to your intended use.
Current Landscape of Cryptocurrency
In recent years, familiarity with cryptocurrency remains at an all-time high. Then again, this popularity does not immediately translate to actual adoption as a mainstream currency.
Currently, cryptocurrency is mainly intersecting with the gaming and gambling industry, with game developers integrating crypto directly into their gaming economies. This integration allows both the gaming industry and the crypto industry to flourish as more gamers embrace these digital currencies.
Outside the gaming and gambling industry, especially on the payment front, several merchants, especially those in technologically advanced Australia, are slowly accepting crypto as payment for products and services. A great example would be the small-town pie shop accepting payments in Bitcoin. Aside from food shops, online merchants like those that sell online content are also prone to adopting cryptocurrency as a payment method, as it offers lower transaction fees and faster settlement times.
However, there is still friction when it comes to adopting crypto as a currency in the most important purchases for people, such as buying properties or other significant investments. This resistance often springs from concerns about volatility, regulatory limitations, and the overall difficulty in understanding of how cryptocurrencies work.
Accordingly, the most recognized barrier to its adoption is its integration with the traditional financial systems. Considering that cryptocurrency runs on a decentralized network and does not undergo checks and balances through financial institutions, this creates challenges in establishing trust and legitimacy in the eyes of each country’s regulators. Until this integration improves, traditional finance and crypto communities will remain at a standstill.
Will Crypto-Backed Credit Cards Become the Link to Its Mainstream Adoption?
The answer will always be a maybe.
However, we can recognize that by integrating cryptocurrency into credit cards, a financial tool that many people are familiar with, it could be the start in bridging the gap between traditional finance and digital currencies. Potentially, it could lead to increased adoption and usability in everyday transactions soon.
Then again, this potential needs to be realized. What cryptocurrency stakeholders need to do is to address first the key barriers to its realization, such as the lack of education for users on cryptocurrencies and the challenge of integration with traditional financial systems. Accordingly, stakeholders must work together with regulators to enact supportive policies and encourage fintech companies to refine their offerings that will encourage users to engage with them proactively.
While crypto-backed credit cards may not entirely guarantee the widespread adoption of cryptocurrency as a mainstream currency, they may link and initially bridge the gap between digital and traditional financial systems, which may lead to its widespread acceptance.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
