Hong Kong Startup to Battle Revolving Credit with Asia’s First Crypto Visa Debit Cards

Journalist:
September 7, 2018

Industry startup Crypto.com, formerly ‘Monaco’ before a rebrand, has revealed its plan to issue 100,000 Visa-powered cryptocurrency debit cards in Hong Kong and Singapore.

The Hong Kong startup confirmed that it would pit its debit cards against the insecure revolving credit practiced by mainstream credit card issuers, as reported by the South China Morning Post. Kris Marszalek, Crypto.com’s founder and chief executive officer, referred the line of credit practice as “unethical,”  which unjustifiably allows banks to make profits from undeserving people.

“These people should not be given a credit card in the first place,” said Marszalek.

Revolving Credit v/s Crypto-Backed Lending

The availability of credit when needed is known to be one of the main advantages of Revolving Credit. However, it also influences credit card users to spend more than they afford. Non-payments – or even late payments – can trap borrowers into the maze of compound interests. Also, Revolving Credit allows banks to keep loan rates unhinged, and rights to change credit limits and interest rates at will.

Projecting Crypto.com’s crypto-enabled debit cards as a viable solution, Marszalek revealed that they would offer money lending services to their crypto-card holders. The business model will reject revolving credit practice by choosing to lend fiat money by collateralizing cryptocurrencies. People will only be able to borrow 40-60 percent of their pledged cryptocurrency in fiat money. The method also means that Marszalek would not rely on borrower’s credit scores like its traditional counterparts.

“Crypto.com would only face the risk from volatility in the value of the bitcoin and MCO pledged as collateral,” he said.

Crypto.com has applied for money lending license in the countries it is expanding to, starting with Hong Kong and Singapore. Once approved, Marszalek expects Crypto.com to disrupt the credit card history – once for all.

Mass Adoption, Liquidity, and Whatnot

Crypto.com claims that their Visa-powered debit cards would allow an easy switch between cryptocurrencies and fiat, thereby making cryptocurrency accessible to more users and improving the overall liquidity. The company currently supports five cryptocurrencies – Bitcoin, Litecoin, Ethereum, Binance Coin and their very own institutionalized currency, MCO – convertible to a total of seven fiat currencies, including Hong Kong Dollar, Singapore Dollar, and the US Dollar.

The real challenge, however, is to make crypto debit cards more attractive than traditional cards. In its current format, users accuse crypto debit cards of charging an absurd amount of middlemen-induced fees for their services. Furthermore, the underlying volatility of the crypto-market makes it impractical for end-users to use it as a regular payment medium.

Crypto.com currently offers cash backs, lower exchange rates, feasible ATM withdrawal limits, and many other attractive services with its range of debit cards. The company plans to include cryptocurrency trading services and an automated cryptocurrency buying and selling service into its portfolio in the near future.

Featured image from Shutterstock.

Yashu Gola @whoisyashu

New Delhi-based Yashu Gola has been working as a cryptocurrency analyst/journalist since 2013. He is an information technology graduate, a cryptography junkie, a filmmaking enthusiast, and an avid reader of Jon Erickson, Agatha Christie, JK Rowling, and Isaac Asimov.