SINGAPORE (BLOOMBERG) - A recurring challenge for bitcoin and other cryptocurrencies is how to make them work in the real world. A Singapore-based start-up says the answer is its Visa card.
TenX is pitching its debit card as an instant converter of multiple digital currencies into fiat money: the dollars, yen and euros that power most everyday commerce. The company said it takes a 2 per cent cut from each transaction, which are limited to US$2,000 (S$2,700) a year, and has received orders for more than 10,000 cards.
Tenx's bid to make digital currencies easier to spend comes amid massive volatility and infighting within the cryptocurrency community. Bitcoin, the most popular, slumped after reaching a record in June amid concerns about a split in two, only to recover as fears faded. The company has built an app that serves as a digital wallet connected to the Visa card so that when it is swiped at a cafe or restaurant, the merchant is paid in local currency and the users' crypto account is debited.
"You're mixing two worlds that are night and day," co-founder Julian Hosp said in an interview. "When the user spends the cryptocurrency, we have to instantly switch these currencies to fiat and pay to Visa straight away. It's a lot of pathways."
Hosp said transactions are processed immediately and it does not impose any charges on top of the conversion fee that is set by cryptocurrency exchanges, which typically is 0.15 to 0.2 per cent. The card now supports eight digital currencies, including the lesser-known dash and augur, and aims to offer about 11 of them by the end of the year.
TenX currently processes about US$100,000 of transactions a month. By the end of 2018, it is targeting US$100 million in monthly transactions and a million users.
TenX has an advantage in moving early, but the start-up can expect competition in the future from major financial institutions and venture capitalists with deeper pockets and direct access to clients and databases, said Mati Greenspan, a Tel Aviv, Israel-based analyst at social trading platform eToro.
"It's an incredible concept," said Greenspan. "At the end of the day, it's going to depend a lot on customer relations. Are they meeting the customers' expectations? Can somebody else do it better?"
TenX's efforts to make digital currencies spendable come as it joined the many blockchain-based start-ups taking advantage of initial coin offerings. ICOs are a cross between crowd-funding and an initial public offering that firms use to raise funds by issuing digital tokens rather than stock.
In its token sale last month, TenX raised US$80 million with about half to be used to expand operations while the rest will provide liquidity for a cryptocurrency exchange in the works, said Hosp.
The company had previously raised US$120,000 from angel investors and US$1 million in a seed round led by venture capital firm Fenbushi Capital, which lists Ethereum's co-founder, Vitalik Buterin, as a general partner. TenX is not expecting to become profitable in the next two years as it focuses on expanding services.
"One thing we want to offer in the end, is that you can switch cryptocurrencies within the app," said Hosp. "If we do this, we can become the market maker, which can bring in a lot of revenue."