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Most interesting thing here is that this came without any prior notice to any parties in the process, effective immediately. Sure looks like someone pressed a

Most interesting thing here is that this came without any prior notice to any parties in the process, effective immediately. Sure looks like someone pressed a panic button.

throwaway5752 9y ago
Seems like it was a very bad business idea in the first place, and I'm surprised it wasn't cancelled sooner. Before you downvote me consider the business model of credit card processors, and how volatility and rapidly deflating currency would effect their cash flow.
- jstanley 9y ago
  > how volatility and rapidly deflating currency would effect their cash flow. Not at all? You obviously don't understand what a bitcoin debit card is. It's just like a normal debit card, but you fund it with bitcoin. The company you get the card from sells your bitcoin for fiat currency at the time you make a purchase (or at the time you top up the card, depending on how they do it). The properties of bitcoin are completely irrelevant to the mechanics of the card.
  - tw04 9y ago
    >The properties of bitcoin are completely irrelevant to the mechanics of the card. On what planet? If the price fluctuates the way bitcoin has been, Wavecrest could literally be bankrupt before Visa even knew about it to pause any further transactions. At which point VISA is responsible, you think they're going to risk billions of dollars on a currency that is clearly a bubble at this point?
    - jstanley 9y ago
      No, that is wrong. 1.) Wavecrest assumes absolutely no exchange rate risk as they don't deal with the BTC, a company like Xapo does 2.) Xapo make a very big margin on the bitcoin sale 3.) The companies that perform the sale at topup time rather than purchase time work out how many GBPs you get after they've sold your BTC, so they assume no risk at all, and the companies like Xapo that perform the sale at purchase time structure their operations to minimise the risk of losing money, and they're aware of the risk, and they're far from the first company in the history of the world whose operations require them to adequately manage risk.
      - altern8tif 9y ago
        What is Wavecrest's business model as a card issuer then? [Genuine question]
        jstanley 9y ago
        My guess is they take a transaction fee in the same way Visa do.
        theptip 9y ago
        They get a cut of the ~2% processing fee that Visa charges the vendor, and they charge some additional fees to the payor as well. The details are very dependent on commercial negotiations (i.e. how much volume the payor is bringing, etc).
      - mannykannot 9y ago
        Is Wavecrest not exposed to the risk that Xapo will not be able to fulfill its obligations, for example if an orderly market in bitcoin-USD conversions breaks down?
        theptip 9y ago
        No, Wavecrest has a stored value account which their payors must top up ahead of time in order to be able to fund payments. This is identical to Paypal, or any other payment rail in the industry. Payment companies don't in general make loans to their customers (though anything is negotiable in principle). Source: have integrated with Wavecrest.
  - Kazamai 9y ago
    The liquidity to sell to fiat is drying up after many are realizing the valuations for crypto are completely fraudulent. There is an astronomical amount of centralized crypto printing going on that has corrupted the entire crypto ecosystem. Tether just wrote in their legal terms that as a of January 1st tether can't be redeemed or used by Americans even though it backs USD. Corrupt exchanges inflated the prices and issued worthless tokens to buy bitcoin then sell it to main street. This is Bernie Madoff x 10,000.
    - tCfD 9y ago
      > Bernie Madoff x 10,000 And they say crypto isn't decentralized!
      - dexterdog 9y ago
        Well, 10,000 Bernie Madoffs is more decentralized than one.
    - notsofastbuddy 9y ago
      > The liquidity to sell to fiat is drying up Do you have some numbers to back this up?
    - xorcist 9y ago
      This is not true. Liquidity in these markets is steadily increasing. It is easier now to sell large amounts of Bitcoin than it was two years ago, and it was easier then than two years prior.
      - Kazamai 9y ago
        Have you tried to sell millions of dollars worth of bitcoin to USD? As soon as there is a down day the exchanges shutdown and stop people from trying to withdraw. The money to cash out billions doesn't exist. All these headlines of founders being billionaires is false. $1.5 billion fake USD pumped crypto. Good luck to anyone holding millions of dollars trying to cash out when the market turns downward. This is adult musical chairs. There will be millions of bag holders and rich exchange criminals.
  - JoelTheSuperior 9y ago
    Surely the high transaction fees are an issue though?
    - lagadu 9y ago
      Unrelated. You pay the card issuer with bitcoin and they sell it for eur. As far as they're concerned they only have to pay a one-time fee for transferring the received bitcoin to an exchange and selling it there. Whenever the cardholder makes a payment, that payment is processed against the fiat-equivalent that they have with the card issuer; the card is funded by bitcoin you send in yes but it's backed by the currency they converted the bitcoin into the moment you sent it their way.
      - tscs37 9y ago
        >As far as they're concerned they only have to pay a one-time fee for transferring the received bitcoin to an exchange and selling it there. Depending on the fee, which atm can be rather high, this can easily be unprofitable or atleast expensive for the card issuer and even card holder.
      - deleted 9y ago
        [deleted]
    - jstanley 9y ago
      Typically you would top it up periodically in larger amounts, not once for every single Visa payment.
  - throwaway5752 9y ago
    > Not at all? You obviously don't understand what a bitcoin debit card is I don't really know if that kind of condescension is called for. I know enough about BTC and general credit/debit card mechanics. I know, for one, that credit cards have very low margins as a percentage of volume processed. I figured that the mechanics of a BTC transaction would be similar to a standard forex conversion, which I would not expect to be 1:1 with actual transactions, but from a hedged reserve (which I assume would be very very difficult to accomplish with BTC volatility, but also possibly inevitable given BTC network transaction rate limitations, as card transaction rates scaled up). Also, though debit and credit differ, wouldn't you have to take some degree of fraud and chargeback risk into account on both sides of the transaction? It's not that these are technically insurmountable, but - back to my original point - it seems like a bad business given the overhead and peoples' expectations around transaction fee rates.
- aussie1233 9y ago
  Nothing todo with crypto, all Wavecrest prepaid cards impacted. New law in effect in Gibraltar since Jan 1.
- andrewmcwatters 9y ago
  > Before you downvote me It's sad you have to say this because HNers abuse their downvote privileges. You have an opinion and you express why. Voicing it allows us to see what other HNers are thinking, and as a result, it contributes to discussion.
  - throwaway5752 9y ago
    Well, I really was hoping to get some good faith feedback - even though I had a definite position - in a topic that can lapse into a more adversarial stances. To be fair, I was really happy at those who took the time to reply, and ... paraphrasing Taylor, downvoters gonna downvote. I did get at least 4 downvotes, for the record. I'll say no more of it. It's an interesting meta discussion for me, but this is off topic/being a bad guest in posting guideline adherence enough already.
FireBeyond 9y ago
No, I don't think so. Their later communications say "We've been working with a new card issuer for a few months and will be ready shortly" which, while not mutually exclusive to their previous "we had no warning" communications, at least _implies_ that they had some inkling this was in the works and either were playing the bluff / negotiation game and got called, or had hoped it would all go away and so hadn't communicated the possibility to their customers.
vkou 9y ago
This is how anyone dealing with money transfer deals with: 1. Unacceptable levels of fraud. 2. Governments changing the rules/clarifying the rules. 3. Discovery of immense counterparty risk. Since #2 did not happen, I'm assuming that #1 was at play. Given that this is bitcoin, #3 is present, but it's not clear that VISA would go digging for it.

Most interesting thing here is that this came without any prior notice to any parties in the process, effective immediately. Sure looks like someone pressed a panic button.

throwaway5752 9y ago

Seems like it was a very bad business idea in the first place, and I'm surprised it wasn't cancelled sooner. Before you downvote me consider the business model of credit card processors, and how volatility and rapidly deflating currency would effect their cash flow.

jstanley 9y ago
> how volatility and rapidly deflating currency would effect their cash flow. Not at all? You obviously don't understand what a bitcoin debit card is. It's just like a normal debit card, but you fund it with bitcoin. The company you get the card from sells your bitcoin for fiat currency at the time you make a purchase (or at the time you top up the card, depending on how they do it). The properties of bitcoin are completely irrelevant to the mechanics of the card.
- tw04 9y ago
  >The properties of bitcoin are completely irrelevant to the mechanics of the card. On what planet? If the price fluctuates the way bitcoin has been, Wavecrest could literally be bankrupt before Visa even knew about it to pause any further transactions. At which point VISA is responsible, you think they're going to risk billions of dollars on a currency that is clearly a bubble at this point?
  - jstanley 9y ago
    No, that is wrong. 1.) Wavecrest assumes absolutely no exchange rate risk as they don't deal with the BTC, a company like Xapo does 2.) Xapo make a very big margin on the bitcoin sale 3.) The companies that perform the sale at topup time rather than purchase time work out how many GBPs you get after they've sold your BTC, so they assume no risk at all, and the companies like Xapo that perform the sale at purchase time structure their operations to minimise the risk of losing money, and they're aware of the risk, and they're far from the first company in the history of the world whose operations require them to adequately manage risk.
    - altern8tif 9y ago
      What is Wavecrest's business model as a card issuer then? [Genuine question]
      - jstanley 9y ago
        My guess is they take a transaction fee in the same way Visa do.
        theptip 9y ago
        They get a cut of the ~2% processing fee that Visa charges the vendor, and they charge some additional fees to the payor as well. The details are very dependent on commercial negotiations (i.e. how much volume the payor is bringing, etc).
    - mannykannot 9y ago
      Is Wavecrest not exposed to the risk that Xapo will not be able to fulfill its obligations, for example if an orderly market in bitcoin-USD conversions breaks down?
      - theptip 9y ago
        No, Wavecrest has a stored value account which their payors must top up ahead of time in order to be able to fund payments. This is identical to Paypal, or any other payment rail in the industry. Payment companies don't in general make loans to their customers (though anything is negotiable in principle). Source: have integrated with Wavecrest.
- Kazamai 9y ago
  The liquidity to sell to fiat is drying up after many are realizing the valuations for crypto are completely fraudulent. There is an astronomical amount of centralized crypto printing going on that has corrupted the entire crypto ecosystem. Tether just wrote in their legal terms that as a of January 1st tether can't be redeemed or used by Americans even though it backs USD. Corrupt exchanges inflated the prices and issued worthless tokens to buy bitcoin then sell it to main street. This is Bernie Madoff x 10,000.
  - tCfD 9y ago
    > Bernie Madoff x 10,000 And they say crypto isn't decentralized!
    - dexterdog 9y ago
      Well, 10,000 Bernie Madoffs is more decentralized than one.
  - notsofastbuddy 9y ago
    > The liquidity to sell to fiat is drying up Do you have some numbers to back this up?
  - xorcist 9y ago
    This is not true. Liquidity in these markets is steadily increasing. It is easier now to sell large amounts of Bitcoin than it was two years ago, and it was easier then than two years prior.
    - Kazamai 9y ago
      Have you tried to sell millions of dollars worth of bitcoin to USD? As soon as there is a down day the exchanges shutdown and stop people from trying to withdraw. The money to cash out billions doesn't exist. All these headlines of founders being billionaires is false. $1.5 billion fake USD pumped crypto. Good luck to anyone holding millions of dollars trying to cash out when the market turns downward. This is adult musical chairs. There will be millions of bag holders and rich exchange criminals.
- JoelTheSuperior 9y ago
  Surely the high transaction fees are an issue though?
  - lagadu 9y ago
    Unrelated. You pay the card issuer with bitcoin and they sell it for eur. As far as they're concerned they only have to pay a one-time fee for transferring the received bitcoin to an exchange and selling it there. Whenever the cardholder makes a payment, that payment is processed against the fiat-equivalent that they have with the card issuer; the card is funded by bitcoin you send in yes but it's backed by the currency they converted the bitcoin into the moment you sent it their way.
    - tscs37 9y ago
      >As far as they're concerned they only have to pay a one-time fee for transferring the received bitcoin to an exchange and selling it there. Depending on the fee, which atm can be rather high, this can easily be unprofitable or atleast expensive for the card issuer and even card holder.
    - deleted 9y ago
      [deleted]
  - jstanley 9y ago
    Typically you would top it up periodically in larger amounts, not once for every single Visa payment.
- throwaway5752 9y ago
  > Not at all? You obviously don't understand what a bitcoin debit card is I don't really know if that kind of condescension is called for. I know enough about BTC and general credit/debit card mechanics. I know, for one, that credit cards have very low margins as a percentage of volume processed. I figured that the mechanics of a BTC transaction would be similar to a standard forex conversion, which I would not expect to be 1:1 with actual transactions, but from a hedged reserve (which I assume would be very very difficult to accomplish with BTC volatility, but also possibly inevitable given BTC network transaction rate limitations, as card transaction rates scaled up). Also, though debit and credit differ, wouldn't you have to take some degree of fraud and chargeback risk into account on both sides of the transaction? It's not that these are technically insurmountable, but - back to my original point - it seems like a bad business given the overhead and peoples' expectations around transaction fee rates.
aussie1233 9y ago
Nothing todo with crypto, all Wavecrest prepaid cards impacted. New law in effect in Gibraltar since Jan 1.
andrewmcwatters 9y ago
> Before you downvote me It's sad you have to say this because HNers abuse their downvote privileges. You have an opinion and you express why. Voicing it allows us to see what other HNers are thinking, and as a result, it contributes to discussion.
- throwaway5752 9y ago
  Well, I really was hoping to get some good faith feedback - even though I had a definite position - in a topic that can lapse into a more adversarial stances. To be fair, I was really happy at those who took the time to reply, and ... paraphrasing Taylor, downvoters gonna downvote. I did get at least 4 downvotes, for the record. I'll say no more of it. It's an interesting meta discussion for me, but this is off topic/being a bad guest in posting guideline adherence enough already.

FireBeyond 9y ago

No, I don't think so. Their later communications say "We've been working with a new card issuer for a few months and will be ready shortly" which, while not mutually exclusive to their previous "we had no warning" communications, at least _implies_ that they had some inkling this was in the works and either were playing the bluff / negotiation game and got called, or had hoped it would all go away and so hadn't communicated the possibility to their customers.

vkou 9y ago

This is how anyone dealing with money transfer deals with: 1. Unacceptable levels of fraud. 2. Governments changing the rules/clarifying the rules. 3. Discovery of immense counterparty risk. Since #2 did not happen, I'm assuming that #1 was at play. Given that this is bitcoin, #3 is present, but it's not clear that VISA would go digging for it.