Coinbase Uses Stablecoins to Back New Credit Card

Coinbase is reportedly introducing a payment card in collaboration with stablecoin-backed credit card FinTech Cardless.

The card is designed for stablecoin holders unable to obtain cards via traditional channels, Cardless Co-founder Michael Spelfogel said in an interview with CoinDesk Tuesday (June 9).

Secured by Coinbase’s stablecoins, the cards are designed for times when a regular credit card can’t be approved on an unsecured basis, but the applicant holds digital assets on the Coinbase exchange. Some of their stablecoin holdings are used as collateral against the debt.

“People apply from all different parts of the credit spectrum,” Spelfogel said. “There are some people that want to use this method because they believe in cryptocurrency, but they’re just beginning their journeys and accumulating wealth.”

The report notes that this product is an extension of a partnership that began last year, when the companies launched a Coinbase-branded card in association with American Express. It’s part of a larger effort by Cardless to modernize bank-based card programs, CoinDesk added.

In related news, PYMNTS wrote last week about the future of crypto as a payment mechanism following the debut of Revolut’s first physical cryptocurrency debit card. The next phase could be determined “by the Main Street merchant bank office,” the report argued.

“After all, a coffee shop, regional retailer or eCommerce merchant does not care whether value originates from a debit account, a credit line or a tokenized wallet if settlement arrives on time, reconciliation is seamless, fraud exposure is manageable and accounting systems remain intact,” the report said.

As crypto spending inches closer to the point of sale, the burden is on payment service providers (PSPs) and issuers to show they can provide enterprise-grade settlement, reconciliation, liquidity management and dispute controls.

Merchants are increasingly wondering whether the infrastructure and systems sitting behind today’s crypto backed card transactions can offer the same reliability, predictability and operational rigor as traditional card rails, the report continued.

“Accepting a crypto payment is not super simple,” WalletConnect CEO Jess Houlgrave told PYMNTS in an interview last month. “You’ve got to have the connectivity, the user experience, the wallet infrastructure, the settlement infrastructure, the conversion and liquidity infrastructure. There’s a lot of pieces there.”

“The majority of merchants don’t want to change their accounting processes,” Houlgrave added. “They want it to be a switch-on in a dashboard or an email saying, ‘Switch on my crypto payments.’”