After Debit Card Fiasco, Xapo Moves On to Mobile Wallet

Xapo, a bitcoin startup headed by financial services entrepreneur Wences Casares, is launching its wallet app on iOS, a move that shows the company has turned some attention to ease of use.

Earlier this year, Xapo came under fire because its bitcoin debit card had to be pulled out of consumer's hands in the U.S. "We didn't learn that we weren't able to send [the debit cards] to the U.S. until the last minute; some people received cards that were working for a while," said Ted Rogers, chief strategy officer at Xapo.

But those cards had to be taken from consumers. It was a "function of who our card partner is and that we need a sponsor bank in the U.S.," Rogers said. Xapo's card partner is WaveCrest, a licensed e-money issuer in Europe. Thousands of cards have been sent in a limited roll out in countries other than the U.S.

The new wallet app, which was released on Android in mid-October, doubles as an interface for Xapo's vault service.

The app allows consumers to send bitcoins to Xapo's cold storage (offline) vaults with a single click. To retrieve bitcoins out of the vaults is considerably more difficult. Retrieving bitcoins takes between 24 and 48 hours with multiple points of contact between the company and the consumer, said Rogers. Multiple emails and text messages are sent and for especially large amounts of bitcoin, the company may even ask for a phoned confirmation.

"From day one, Xapo has been about the vault, about security," Rogers said. The company has been building out multiple vault locations where bitcoins are stored on cold servers underground guarded with intense physical security, he said.

If that sounds a bit archaic for an Internet-based cryptocurrency that has been touted as revolutionary to the faster, cheaper payments push, "that's a very reasonable position to take," said Rogers. "But it's important to remember that there is always a tradeoff between convenience and security."

The vault product is targeted at institutions that want to keep large amounts of bitcoin safe, Rogers said. Xapo currently provides vault protection for multiple hedge funds, high net worth individuals and venture capital funds, he said.

The consumer wallet also gives consumers a way to send, receive and pay with bitcoin, plus there's a tipping function and an earn function, which gives users bitcoins for sharing Xapo on social media or clicking through ads.  Consumers can also buy bitcoins directly from Xapo within the app.

Xapo isn't giving up on releasing its debit card in the U.S. The company is currently looking for a sponsor bank, hoping that the product can roll out next year. But this could be a long process, said Rogers. "We're speaking with banks that have a lot of experience with card programs; we're not looking to educate or learn with the financial institutions we partner with."

For U.S. consumers that received the original card, Xapo sent a small amount of bitcoin for their trouble. Other U.S. consumers never received a card.