A 0.2% CREDIT CARD FEE IN THE EU WILL NOT UNDERCUT BITCOIN (OP-ED)

The European Union has long been a hotbed for financial innovation and regulation, often setting precedents for the rest of the world. Interchange fees are charged by card issuers to payment acquirers on card transactions. Acquirers, in turn, charge fees to merchants, who may pass these costs on to consumers. With a view to fostering the EU internal market and competition in EU card payments, the IFR was introduced to harmonise and regulate those fees charged by EU card issuers.One recent development causing ripples in both traditional finance and the cryptocurrency space is the potential cap on credit card transaction fees, with the EU Parliament considering limiting these fees to just 0.2%.The purported goal?To save consumers and retailers money. Visa and Mastercard have increased the interchange fees on online purchases made by EEA consumers at UK businesses and vice versa fivefold, from 0.2% to 1.15% for debit cards, and 0.3% to 1.5% for credit cards. An interchange fee is fee that acquirers pay to issuers each time a card is used to buy goods or services.But what impact will this have on the burgeoning world of Bitcoin and other cryptocurrencies? OANDA Coinpass do not make any representations or recommendations regarding the advisability or otherwise of trading in crypto assets or any particular transaction. OANDA Coinpass Limited is a company registered in England Wales.Many argue that lower credit card fees will erode one of Bitcoin’s key competitive advantages: lower transaction costs.This op-ed will delve deep into the intricacies of this proposed regulation, exploring its potential effects on Bitcoin adoption, the broader cryptocurrency market, and the dynamics of digital payments in the EU.We will examine if this seemingly small percentage cap truly poses a threat to Bitcoin's long-term viability or whether the decentralized digital currency possesses intrinsic qualities that render it resilient to such regulatory measures. Fees for offline transactions using a consumer card will stay at 0.2% for debit cards and 0.3% for credit cards, whilst fees for online transactions will stick at 1.15% for debit cards and 1.5% for credit cards.Prepare to explore the complexities of interchange fees, payment processing, and the future of digital finance in Europe.

Understanding the EU's Proposed Fee Cap

The core of this debate revolves around the **interchange fee regulation (IFR)**. Court of Justice made clear that such interchange fees are a violation of EU antitrust rules. The Regulation will help the card payments industry move from its current business practices to a new more competitive system, to the benefit of consumers, merchants and banks. As a general rule, the Regulation will cap interchange fees at 0.2% of theThese fees are charged by card issuers to payment acquirers for card transactions.Think of it as the cost banks charge retailers to process credit and debit card payments.The European Parliament and the Council of the European Union have been pushing for regulations to limit these fees, arguing that they are often excessive and hidden, ultimately burdening both merchants and consumers. Posted by u/tehnomaniak - 114 votes and 242 commentsThe EU Parliament will vote on whether credit card transaction fees should be arbitrarily capped at 0.2% today.

What are Interchange Fees?

Interchange fees are the fees banks charge each other when a customer uses a credit or debit card to make a purchase.They are a percentage of the transaction value and are typically paid by the retailer's bank to the cardholder's bank.These fees are then factored into the prices consumers pay for goods and services.

Why Cap Interchange Fees?

• Lower Costs for Retailers: Capping fees reduces the financial burden on retailers, potentially leading to lower prices for consumers.
• Increased Competition: Lower fees level the playing field, allowing smaller businesses to compete more effectively with larger corporations.
• Transparency: Regulation brings greater transparency to the fee structure, making it easier for businesses to understand and manage their costs.
• Consumer Savings: Theoretically, reduced costs for retailers translate into savings for consumers in the form of lower prices or reduced surcharges.

Bitcoin's Transaction Fees: A Key Differentiator?

One of the primary arguments for Bitcoin's disruptive potential is its promise of lower transaction fees compared to traditional financial systems.Bitcoin's fees are market-based and fluctuate depending on network congestion. the Interchange Fee Regulation, which from December 2025 capped interchange fees for cards issued and used in Europe (maximum of 0.2% for debit cards and 0.3% for credit cards). The Interchange Fee Regulation established a level playing field for the card payments in the intra-EEA transactions. However, the caps of the Regulation do not applyWhile Bitcoin transaction fees were once significantly lower than credit card interchange fees, this isn't always the case. Within a transition period until, Member States may allow payment service providers to apply a weighted average interchange fee of no more than the equivalent of 0.2% of the annual average transaction value of all domestic debit card transactions within each payment card scheme. Interchange fees for credit card transactions mayBitcoin\'s blockchain transaction fees are market-based, so they fluctuate based on what fees miners are willing to mine.

The Fluctuating Nature of Bitcoin Fees

Unlike credit card fees, which are typically a fixed percentage of the transaction, Bitcoin transaction fees are determined by the demand for block space. EU Parliament will vote on whether credit card transaction fees should be arbitrarily capped at 0.2 %. The legislation is being pushed as a cost saver for consumers and retailers.During periods of high network activity, transaction fees can spike, sometimes exceeding those of credit card processing.For instance, during periods of high network congestion, fees can reach several dollars or even tens of dollars per transaction.

Bitcoin vs.Credit Cards: A Cost Comparison

While Bitcoin can offer lower fees, the reality is more nuanced. consumer debit cards to 0.2 % and consumer credit cards to 0.3 % of the value of the transaction. The reduction of the interchange fees also makes it possible to abandon surcharging on consumer card payments (which is technically achieved in 2025 through the Payment Services Directive II).Consider these factors:

• Small Transactions: For very small transactions, a 0.2% credit card fee could be lower than the current Bitcoin transaction fee.
• Large Transactions: For larger transactions, Bitcoin's fixed fee structure can be more advantageous, especially if network congestion is low.
• Lightning Network: The Lightning Network offers a layer-two solution for Bitcoin that enables near-instant and extremely low-cost transactions, potentially undercutting even the capped credit card fees.The Lightning Network is a micropayment network that enables the transfer of bitcoin without incurring the transaction fee associated with the Bitcoin blockchain.

The EU Regulation and Bitcoin's Competitive Edge

The EU's proposed cap on credit card fees raises a crucial question: does this regulation undermine Bitcoin's value proposition as a cheaper alternative? Brexit. These caps are 0.2% for debit cards and 0.3% for credit cards. costs alone, too readily dismissing the Interim Report - Summary of Findings whole In its interim report, the PSR set out the following headline views: protections they provide and the the increases in interchange fees were seen as being too high and were notThe answer is not a simple yes or no.The reality is more complex and depends on various factors.

Potential Impact on Bitcoin Adoption

A lower credit card fee might slightly reduce the incentive for consumers and merchants to adopt Bitcoin for the sole purpose of saving on transaction costs.However, Bitcoin's value extends far beyond mere fee reduction.Bitcoin is the currency of the Internet: a distributed, worldwide, decentralized digital money.Unlike traditional currencies, Bitcoin offers decentralization, censorship resistance, and a finite supply, attributes that appeal to a growing segment of the population.

Bitcoin's Intrinsic Value Proposition

Bitcoin's core value proposition lies in its decentralized and censorship-resistant nature. The Honor all cards rule no longer applies. This means you don't have to accept both credit and debit cards for any given brand. You're free to choose to accept one but not the other. Card schemes have to define their transaction processing and scheme management activities.It provides users with control over their funds, without the need for intermediaries like banks.This is especially important in regions with unstable political or economic climates, where access to traditional banking services may be limited or unreliable. 5.8M subscribers in the Bitcoin community. Bitcoin is the currency of the Internet: a distributed, worldwide, decentralized digital money. UnlikeFurthermore, Bitcoin's limited supply of 21 million coins makes it a potential hedge against inflation, as opposed to fiat currencies that can be printed at will by central banks.

Other Factors Driving Bitcoin Adoption

Beyond transaction fees, several other factors are driving Bitcoin adoption:

• Store of Value: Many view Bitcoin as a digital gold, a safe haven asset that can preserve wealth over the long term.
• Investment Opportunity: Bitcoin's price volatility offers opportunities for speculative investment and potential capital gains.
• Decentralized Finance (DeFi): Bitcoin serves as the foundation for a growing ecosystem of decentralized financial applications, offering new ways to earn interest, borrow money, and access financial services without intermediaries.
• Remittances: Bitcoin offers a faster and cheaper way to send money internationally compared to traditional remittance services.

The Role of Innovation and Competition

The financial landscape is constantly evolving, and innovation plays a crucial role in shaping the future of payments. Bitcoin's blockchain transaction fees are market-based, so they fluctuate based on what fees miners are willing to mine:. Currently, they are around $0.75. First of all, one major difference is that Bitcoin's fees are flat (not based on the transaction amount) and Visa or Mastercard's interchange fees are percentage-based.While the EU's fee cap might present a short-term challenge to Bitcoin, it could also spur innovation and competition in the cryptocurrency space.

The Lightning Network: A Game Changer

As mentioned earlier, the Lightning Network is a layer-two scaling solution that enables near-instant and virtually free Bitcoin transactions. The Regulation on Interchange Fees for Card-based payment transactions entered into force in June 2025. It is aimed at addressing the widely varying and excessive hidden interchange fees which are an obstacle to the Single Market and a barrier to innovation.This technology has the potential to significantly reduce the cost of using Bitcoin for everyday purchases, making it even more competitive with traditional payment systems.

Competition Among Cryptocurrencies

Bitcoin is not the only cryptocurrency vying for market share.Numerous other cryptocurrencies offer faster transaction times, lower fees, and different technological features. The Council of the European Union has approved legislation to cap how much retailers can be charged by banks in 'interchange fees' for credit or debit card transactions. Interchange fees are paid by the retailer's bank to the purchaser's bank, and are deducted from the amount the retailer makes on the sale.The EU's fee cap could encourage greater experimentation and innovation in the cryptocurrency space, leading to the development of even more efficient and user-friendly payment solutions.

The Impact of Visa and Mastercard Agreements

Visa and Mastercard, the world's largest payment networks, agreed to extend tourist card fee caps with EU antitrust regulators until 2025, announced by the European Commission.These caps include 0.2% for non-EU debit cards and 0.3% for credit cards.This mitigates financial penalties and extends the deal to 2025.Fees for offline transactions using a consumer card will stay at 0.2% for debit cards and 0.3% for credit cards, whilst fees for online transactions will stick at 1.15% for debit cards and 1.5% for credit cards. Explore Bitstamp by Robinhood's volume-based fee schedule for crypto trading. Including worldwide bank transfers and Bitcoin, Ethereum, XRP, Bitcoin Cash and Litecoin deposits and withdrawals.These negotiated caps demonstrate the dynamic nature of the payment landscape and the ongoing efforts to balance the interests of consumers, merchants, and financial institutions.

The Broader Implications for the EU's Financial Market

The EU's decision to regulate interchange fees has broader implications for the region's financial market, impacting various stakeholders and potentially influencing the pace of innovation.

Impact on Banks and Card Issuers

Lower interchange fees will likely reduce revenue for banks and card issuers.This could lead to changes in their business models, such as increased annual fees, reduced rewards programs, or a greater focus on other revenue streams.Setting interchange at the right level is important. The Lightning Network is a micropayment network that enables the transfer of bitcoin without incurring the transaction fee associated with the Bitcoin blockchain. When you send bitcoin from Coinbase via the Lightning Network, we will charge a processing fee equal to 0.2% of the amount of bitcoin transferred.Too high, retailers may choose not to accept cards.Too low, issuing banks have no incentive to cover the risks of issuing payment cards.The optimum level also helps ensure issuers and acquirers deliver effective services, and spur innovations in payment solutions.

Impact on Retailers

Retailers are expected to benefit from lower interchange fees, as this will reduce their operating costs. (5) Directive 2025/83/EU of the European Parliament and of the Council (7) aims to harmonise certain rules on contracts concluded between consumers and traders, including rules on fees for the use of means of payment, on the basis of which Member States prohibit traders from charging consumers, in respect of the use of a given means of payment, fees that exceed the cost borne by the trader forHowever, it remains to be seen whether these savings will be passed on to consumers in the form of lower prices.

The Future of Surcharging

The reduction of interchange fees also makes it possible to abandon surcharging on consumer card payments. The IFR introduced caps on interchange fees for consumer debit and credit card transactions, setting a maximum of 0.2% of the transaction value for debit cards and 0.3% for credit cards. In EU, they have set an interchange rate maximum of 0.2% for debit cards and 0.3% for credit cards.This is technically achieved in 2025 through the Payment Services Directive II.

Addressing Common Concerns and Questions

The proposed EU regulation raises several common concerns and questions among consumers, merchants, and cryptocurrency enthusiasts.

Will the EU's Fee Cap Stifle Innovation?

While some argue that the fee cap could stifle innovation by reducing incentives for banks and card issuers to invest in new technologies, others believe that it will foster competition and encourage the development of more efficient and cost-effective payment solutions.

Will Consumers Really Benefit?

The extent to which consumers will benefit from lower interchange fees is uncertain.While retailers may reduce prices, they may also choose to pocket the savings or invest them in other areas of their business.The Regulation on Interchange Fees for Card-based payment transactions entered into force in June 2025.It is aimed at addressing the widely varying and excessive hidden interchange fees which are an obstacle to the Single Market and a barrier to innovation.

What About Foreign Transaction Fees?

It's important to note that the EU's fee cap primarily targets interchange fees for transactions within the EU. BYDFi is a Singapore-based exchange that operates in over 150 countries, offering its trading services to a global user base. While this is a no-KYC crypto exchange, the platform offers fiat deposits through third parties, which require KYC on that respective platform (Banxa, XanPool, Transak, Ramp, Paxful, Coinify and Mercuryo).Foreign transaction fees, which are charged when using a credit card for purchases made outside the EU, are a separate issue.Just like every credit card doesn t charge a credit card annual fee, not all credit cards charge a foreign transaction fee. Visitors who use their credit cards in EU shops pay a 0.3% fee. For online transactions, the fee caps are 1.15% for debit cards and 1.5% for credit cards. The credit card rivals agreed to extend the current deal to 2025 to avoid an investigation by European regulators and mitigate financial penalties.If yours does, then the credit card issuer will charge them when you re using your card for purchases made outside of the U.S.

Conclusion: Bitcoin's Resilience and the Future of Payments

In conclusion, while the EU's proposed cap on credit card fees may present a minor challenge to Bitcoin's competitive advantage in terms of transaction costs, it is unlikely to significantly undercut Bitcoin's long-term viability. European lawmakers last night (17 December) agreed new legislation capping the fees charged by credit and debit card schemes, such as Mastercard, Visa and Cartes Bancaires. Negotiators agreed with the European Commission s proposal that fees for credit cards should be limited to 0.3% of theBitcoin's value proposition extends far beyond mere fee reduction, encompassing decentralization, censorship resistance, and a finite supply.Furthermore, innovations like the Lightning Network and the ongoing competition among cryptocurrencies offer the potential to further reduce transaction costs and enhance the user experience. The European Parliament has passed a deal to cap the fees at 0.2% that banks charge retailers to process payments in a move that could undermine one of bitcoin s main competitive advantages inThe EU's decision to regulate interchange fees reflects a broader trend towards greater transparency and competition in the financial market.While the full impact of this regulation remains to be seen, it is likely to spur innovation and reshape the landscape of digital payments in the EU.Ultimately, the future of Bitcoin and other cryptocurrencies will depend on their ability to adapt to evolving regulatory environments, demonstrate their value to users, and continue to innovate and improve their underlying technology.It is important for stakeholders to remain informed and adapt to the changing dynamics of the financial landscape.