The crypto industry has been on a wild ride. What was once an entirely speculative technology that very few people understood, has become…well, still a mostly speculative technology that very few people understand. But more consumers and large institutions than ever believe it can transform our relationship with money and investing in the digital age.
Last year, Deserve wrote about our partnership with BlockFi to launch the very first crypto rewards credit card and what it could mean for the broader industry. BlockFi’s offering was proof that cryptocurrencies and their underlying technologies have real utility. Just last month, Forbes mentioned crypto credit cards as one of three “innovations rejuvenating the credit card market.”
Crypto is still a divisive topic, but we are confident the technology still has a bright future. The digital asset space is constantly evolving, from emerging use cases to institutional interest and the long-overdue introduction of proposed regulations. Today, we’ll explore some recent developments in the crypto space.
As we anticipated, the BlockFi card has set a major trend, and other credit companies are racing to follow suit. In April 2022, US Cryptocurrency Exchange Gemini released its own crypto rewards card in partnership with Mastercard, utilizing the same general model as BlockFi. That month, a third crypto credit card entered the space via Nexo, a European-based digital asset management and crypto-backed-lending platform.
Crypto debit cards are also gaining traction because they allow users to instantly convert their crypto into fiat currency (such as US dollars) to make real-life purchases. The issue with crypto debit cards is that such a transaction actually constitutes the sale of digital assets, which means the purchaser will often need to pay additional capital gains taxes at the end of the year. But with crypto credit cards, the cardholder’s crypto holdings aren’t ever being sold, but merely held against their line of credit.
Going to the movies this weekend? That’ll be about 125 DOGE (or around 500 with a small popcorn). That’s right: AMC Entertainment now accepts crypto as payment at their theaters, including popular meme tokens Dogecoin and Shiba Inu. Of course, AMC’s move is merely a ripple in a much broader trend taking place across the retail industry. According to the DAAG report, there are more than 18,000 retail stores that now accept various cryptocurrencies at their brick-and-mortar locations as well as online.
While 18,000 might seem like a large number, a new survey published by Deloitte suggests that number will likely multiply significantly in as little as two years. The survey revealed that 75% of US retailers that don’t already accept crypto are planning to get in on the action sometime in the next 24 months. Now, other big retailers are throwing their names in the crypto hat, like Starbucks, Tesla, Home Depot, and even Gucci.
This development speaks to the fact that the cryptocurrency industry is far exceeding the expectations of its skeptics in terms of widespread adoption and mainstream acceptance. As more and more retailers roll out crypto initiatives, it will be interesting to see whether digital assets can depart from their primary use case as high-risk alternative investments.
One of the largest barriers to growth and adoption in the crypto space has been the ongoing lack of regulations and protections for investors. While cryptocurrencies have always been vulnerable to scams, theft, and market manipulation, a spike in criminal activity over the past couple of years has led to even more scrutiny.
In late May, popular stablecoin TerraUSD lost its peg to the US dollar after its native token LUNA fell in value from over $90 per token to less than a cent in barely a day's time. The event resulted in billions of dollars abruptly vanishing from the market, and many retail investors losing their life savings.
Stablecoins had been under scrutiny for a while, but the crash of TerraUSD appears to have been the last straw for US lawmakers. On June 7, 2022, senators Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY) introduced the Responsible Financial Innovation Act, which is the most comprehensive proposal of cryptocurrency regulations to date. Some key features of the bill include an attempt to distinguish between digital assets and securities in the crypto space, a requirement that all stablecoins are backed by tangible reserves, and an annual $200 tax deduction on digital asset sales for investors.
While most believe that the bill is unlikely to pass anytime soon as it currently stands—due largely to political divisions—it signals much-needed progress toward meaningful oversight of the crypto market.
Between the continuous growth in the cryptocurrency credit card and lending space, the increasing number of retail stores willing to accept digital assets as payment, and regulatory framework finally beginning to take shape, crypto’s evolution from a trend to a mainstream technology is almost complete. Be sure to check in here for more updates in the space!