Binance Makes Big Moves in Creating Fiat-to-Crypto Gateway

By Benson Toti - min read
01 February 2019

With the crypto-winter readying to claim its first major casualty in the NEM Foundation, it’s easy to forget that a lot of companies have been silently growing their profile over the last year. One such company is Binance. After becoming the de facto platform for trading altcoins, Binance has now decided to vie for the position of top fiat-to-crypto gateway.

As announced in a press release on January 31st, 2019, Binance is planning to allow traders to use Visa and MasterCard to buy crypto on their platform. The big question is whether card issuers will deny the use of credit for making crypto purchases.

Evolution of a Juggernaut

This is the first time Binance has even allowed fiat deposits. Until now, if you want to buy any of the 150+ cryptocurrencies on Binance, you would have to go through a circuitous path. First, you would deposit fiat currency into a different exchange. Then, you would buy a more “blue chip” cryptocurrency like BTC or ETH. And only after you had done that could you transfer that crypto to Binance and begin to actually trade as you wished.

According to Changpeng Zhao, the CEO of Binance, Binance evolving to meet the reality that much of the world’s money is still in fiat. Therefore, they would like to build a fiat gateway to put Binance in a strong strategic position when the next boom comes around. As the world’s largest cryptocurrency exchange (based on adjusted daily volumes) according to CoinMarketCap, the significance within the trading industry cannot be overstated here.

Limited Credit Card Payments

Ever since Coinbase started to limit (or completely block in some countries and states) the use of credit cards for purchases of cryptocurrency, users have had to employ payment options like e-transfers, debit cards (sometimes), and bank transfers. These work, but come with delays and aren’t as convenient as using a credit card.

There were several very reasonable points in the rationale for blocking credit cards. First, banks didn’t want to deal with chargebacks if the customer lost money on their trade and tried to reverse it. Also, there were ton of customers who just plain don’t understand these investments and shouldn’t be making such large speculations on it. Finally, credit cards are basically short-term loans and it is not a strong financial move to allow your customers to gamble with loan funds like that.

Strategic Bet With Huge Potential Payoff

The fact that Binance is beginning to accept credit card payments might be a sign of where they think the market is going. December 2017’s crash was when many exchanges reduced their willingness to accept crypto. Naturally, customers were happy to cover their charges when Bitcoin was going up 20% each month. But once prices started going down, chargebacks and disputes began to occur.

Binance has evolved into a popular exchange for high-frequency traders, and surpassed daily trading volumes of $1 billion during the crypto boom of late 2017. Since then, the Malta-based company has been continually evolving their offering. This is just the latest manifestation that might establish a brand new stream of users.

The initial rollout of these payments will allow users to buy Bitcoin, Ethereum, Litecoin, and Ripple. Simplex will act as the payment processor partner in this new service. Though there is still a lot up in the air regarding how credit card companies will react to this, it is a strong move for the wider adoption of crypto. What is truly amazing is that Binance may now offer the quickest way convert fiat currency into altcoins.