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Ugh. Ugh.
A new study conducted by cryptocurrency tax software CoinLedger reveals that the retail and e-commerce sector has the largest number of businesses offering the option to purchase through cryptocurrencies.
The study compiled a list of 400 major companies listed by BitPay as accepting cryptocurrency methods and classified them into sectors, to discover which ones contain the most companies offering cryptocurrencies as a means of payment.
Retail and e-commerce hold the top spot with a total of 76 businesses accepting cryptocurrency payments. The sector includes clothing and accessories stores such as Adidas, Yankee Candle and H&M, as well as online shopping platforms such as Etsy.
Adidas and Etsy told us they don't accept payments in cryptocurrencies. Yankee Candle and H&M did not respond to our emails.
The food and catering sector comes in second place with 72 companies. Examples include Chipotle, Chuck E Cheese's, Domino's, Hard Rock Café, and delivery services like DoorDash and Uber Eats.
Uber Eats and Domino's UK told us they don't accept payments in cryptocurrencies. Chipotle said it accepts digital payments including cryptocurrencies through Flexa-enabled apps. We are still waiting for a response from others, although we can guess their response by visiting their websites.
What is happening here? Mostly, it's gift cards. H&M, Domino's, and Uber Eats are listed above because Bitpay resells their gift cards for cryptocurrencies.
Prepaid cards have been used as shadow currency long before Bitcoin was invented. Its current popularity in cryptocurrencies (and other communities) is because prepayment offers several advantages over on-chain tokens.
Unlike cryptocurrencies, an e-retail voucher can be redeemed almost anonymously, instantly, at face value. The use usually falls within the jurisdiction of financial regulatory bodies. Purchases and transfers are largely untraceable. The trust lies at the central counterparty, with a multinational corporation acting as depository and clearing house. Sales are exempt from VAT and reporting capital gains is a matter of personal conscience.
A recent 2010 email from Satoshi Nakamoto, Bitcoin's chief architect, predicted the use of prepaid cards. Cryptocurrencies were easy to create and difficult to cash out, Nakamoto reasoned, but prepaid debit cards might offer the unbanked a convenient way out.
Gift cards will become a currency for traders who are unwilling or unable to purchase cryptocurrencies through traditional channels, a development that is less expected. An investigation published by The Intercept in 2018 described how users were exchanging bitcoin for gift cards on peer-to-peer marketplaces at above market price.
Since then, many retailers have tightened security on card purchases, including by placing limits on top-ups and preventing card purchases. Regulatory efforts have focused on warning of consumer trust fraud and reducing opportunities for money laundering.
Meanwhile, in the booming crypto-gift card sector, know-your-customer and anti-money laundering measures are applied unevenly.
Other popular cryptocurrency exchange sites include Bitrefill from Sweden, which says unverified customers can make up to 15 purchases per day worth $5,000, or $10,000 per month. Germany-based Coinsbee says in its FAQ that it does not implement any KYC checks under €1,000 per transaction with a total value of up to €10,000. Live On Crypto, an altcoin issuer that says it supports food banks, bought space on CoinTelegraph last week to announce that its gift card store requires “no personal information at registration and checkout.”
Last week, shortly after we inquired about its KYC and AML policies, US-based Bitpay posted on its website that transaction limits for unverified customers were $3,000 for payments and $1,000 for refunds, with a cap of $1,000 applying to resident customers. In the European Union. . At press time, the company had not responded to our requests for comment.
Among the large centralized cryptocurrency exchanges, only Binance offers cryptocurrency gift cards after it launched a product in June 2023. (It added client verification requirements on sales and transfers about two months later.) Coinbase has stopped selling prepaid cards and no longer supports cash withdrawals. Card functionality that launched in 2018. FTX sold gift cards at select Gamestop stores as part of the partnership, but that ended with FTX.
However, it is still possible to purchase cryptocurrencies using prepaid cards. Niche peer-to-peer marketplaces like LocalCoinSwap offer this trade, as do sellers on forums including Reddit's r/giftcardexchange board.
Paxful, the US-based P2P marketplace mentioned in the Intercept article, allows cryptocurrency sellers to accept up to 133 brands of gift cards as currency. A dollar in Walmart coupons typically buys about $0.85 worth of bitcoin on Paxful, or $0.50 worth of ether, with worse prices quoted by sellers who don't need receipts or physical delivery.
Paxful says it applies all relevant KYC requirements. Its website blocks incoming traffic by IP address to comply with US regulatory controls and applies a $1,000 cap only to customers the company has verified by phone.
While cryptocurrencies are gradually being legalized into the financial mainstream, gift card legislation could look beyond the curve.
Electronic money laws in the US, UK and EU only apply to prepaid debit cards for general use. Coupons tied to a single retailer (known as closed-loop cards) are stored-value instruments, not payment instruments, so their sellers can avoid many of the reporting requirements imposed on money transmitters.
Attempts to tighten the rules face strong opposition. Trade groups, including the Electronic Money Association and Eurocommerce, have called on the European Union not to make gift card customer identification mandatory as part of an update to anti-money laundering rules.
The EU proposed in February that any exemption be “conditioned on strict restrictions regarding the maximum value of the product, its exclusive use for the purchase of goods or services, and on the condition that the stored quantity cannot be exchanged for another value.”
The emphasis on gift card values is unlikely to have a significant impact on customers of Adidas, Chuck E. Cheese's, Yankee Candle and Hard Rock Cafe. How broader restrictions will impact cryptocurrencies is a more complex question to answer.
