Background
Visa Debit
As you know, our mission is to enable independence. This mission is made possible in part by the Bitcoin Portal which allows you to buy, sell and use bitcoin all within your control. Bitcoin in your sole custody. The Bitcoin Portal was officially launched in November 2022, but there was a period of time, before it had grown to blossom into the Bitcoin Portal that you know and love, where we had an online instance that allowed our customers to buy bitcoin with Flexepin (a voucher based payment system) and Visa Debit – something the majority of Canadians have access to.
Visa Debit offered a bitcoin buying experience that was unlike any other payment rail. It enabled our customers to buy bitcoin in a traditional online shopping experience. No account funding and no order books to deal with – all from the comfort of your home. In fact, the product workflow that you experience when you use Interac e-Transfer is inspired by our Visa Debit flow. But, alas, all good things must come to an end.
It isn’t because it wasn’t being used. Nor is it because it was prohibitively expensive to operate. In fact, it was a much bigger issue that we were facing. Something that will continue to haunt bitcoin’s adoption for decades to come.
Operation choke point
Apparently, operation chokepoint ended August 17, 2017. The mission was designed to limit access to banking for industries that were believed to be at high risk for fraud and money laundering. It was achieved by issuing informal (often unwritten) suggestions to banks. It was under the radar and felt “black ops”. You can read more about operation choke point on wikipedia, but that isn’t the basis of what we’ll be discussing today. Today we’ll be talking about these same practices as a threat to bitcoin.
The fraud
Solution = problem
The idea was to crack down on sketchy stuff and protect people from financial fraud. Makes sense, right? But turns out, this operation unintentionally showed us a real issue with having too much power in one place. They started flagging certain industries, including ones dabbling in bitcoin, as risky business. The problem? Legit businesses got caught up in the same net.
That net included us. A publicly traded, 10-year old bitcoin company that has been on-side from the beginning. Our customer’s banks were preventing them from using Visa Debit to buy bitcoin. All in the name of “protection.” Transactions would just fail and we had no way of pushing them through. It was frustrating for our customers, and it was frustrating for us. But! There was a solution.
Part of the transaction had an additional verification step – 3DS. It’s something that adds a layer of scrutiny to each and every transaction. It essentially slows the transaction down, gives the bank some extra time (a few minutes) to investigate certain details about the transaction.
- Transaction size
- Amount
- Merchant name
- etc
As you can imagine, Merchant name caused some issues. When bitcoin is a “bad thing” (thanks Operation Choke Point) and “Bitcoin Well” shows up as the merchant – it’s an easy catch for the robots to detect. This was the main reason our transactions were being blocked.
Just turn it off
So, we invested in our anti-fraud measures (basically whatever we could to prevent fraud) and it worked! We were able to process Visa Debit transactions. In fact, we processed over 1,500 Visa Debit transactions! The bank oligarchies were none-the-wiser, the people were able to buy bitcoin directly from their bank. Life was good! But, the fraud did eventually come.
Obviously the fraud was expected, and we had done a good job of fighting it with our anti-fraud measures. The bigger problem was the consequence of the fraud from our banks. Because we didn’t have 3DS turned on, we had to pay it back. When I say “had to pay it back” I mean we didn’t have a choice and they just reached their grubby little hands into our pocket and took the money. No opportunity for appeal. No way for us to show our anti fraud measures and how we were confident we had done our part. Just loss of funds. No questions asked.
The case for bitcoin
It’s ironic isn’t it? We, a company focused on enabling independence are made less independent because of what we sell? But it also showcases the case for bitcoin. Merchant chargebacks aren’t new – they’ve been around since we started using plastic to pay for things. But bitcoin completely eliminates them.
Bitcoin is finality. Fiat is ctrl-z. Bitcoin allows you to be independent, fiat forces your dependence on the banks. So, for now, you can no longer use Visa Debit to buy bitcoin. You can still use e-Transfer to buy or sell bitcoin. You can still pay your bills in bitcoin. If you’re in the USA you can connect your bank account. But, we’ll say goodbye to Visa Debit, and we’ll shake our fists at Operation Choke Point.
Stay sovereign 🫡
Adam
