@daily_btc_lore | Daily Bitcoin History Threads

July 6, 2016 | 10 years ago today

Buenos Aires Blocked Uber. Bitcoin Helped.Buenos Aires Blocked Uber. Bitcoin Helped.

In July 2016, the city of Buenos Aires tried to strangle Uber through its payment system. Bitcoin-backed debit cards became one of the tools that kept the service running. The story is messier than the headlines suggested, and more interesting for it.

Buenos Aires Declares War on UberBuenos Aires Declares War on Uber

Uber launched in Buenos Aires in April 2016 without a license. The city government declared it illegal and set out to make operations impossible. Rather than a physical crackdown, Buenos Aires chose a financial weapon: it ordered Argentine banks and credit card issuers to block all transactions to Uber's app. Domestically-issued Visa and MasterCard cards worked everywhere else in the world. They just stopped working for Uber in Argentina.

The Foreign Card WorkaroundThe Foreign Card Workaround

Uber's response was to direct users to foreign prepaid debit cards: Entropay, EcoPayz, Payoneer, ZapZap. These cards were issued outside Argentina and processed as foreign transactions, outside the scope of the domestic banking block. Buenos Aires had targeted the Argentine financial system; foreign-issued cards weren't subject to it.

Xapo: Bitcoin's Off-RampXapo: Bitcoin's Off-Ramp

Among the options that emerged, Xapo stood out as the primary Bitcoin-backed workaround. Xapo was a Gibraltar-based Bitcoin wallet and debit card service that issued its cards through Wave Crest Holdings, a payment infrastructure provider registered outside Argentine banking jurisdiction. Argentina's Bitcoin community found that a Xapo card worked for Uber when local cards did not. The word spread.

How It Actually WorkedHow It Actually Worked

The mechanism was indirect. A user would sell Bitcoin for USD on an exchange, load the dollar balance onto their Xapo debit card, and pay for the Uber ride via standard Visa payment rails. Bitcoin never touched the Uber transaction directly. What it did was serve as the store of value that funded a card issued by an entity the Argentine banking system couldn't reach. The payment was a Visa transaction; the money behind it came from Bitcoin.

What the Headlines Got WrongWhat the Headlines Got Wrong

Contemporary coverage called it "Uber accepts Bitcoin." That was inaccurate. Uber directed users to foreign prepaid cards as a general workaround; Xapo emerged as the Bitcoin community's option of choice, one that Uber tolerated. The distinction matters: this was not Uber making a statement about Bitcoin. It was Bitcoin users finding a workaround that happened to work.

The Workarounds Kept ComingThe Workarounds Kept Coming

Xapo was not the only adaptation. Some Buenos Aires Uber drivers began accepting cash from passengers and settling with Uber through personal informal arrangements. The city had targeted a single point of financial control (card payments) and found that a service sufficiently motivated to keep running would route around every blocked method, whether through foreign cards, Bitcoin-backed cards, or handshake agreements between drivers and riders.

The End of the WorkaroundThe End of the Workaround

In December 2017, Visa suspended Wave Crest Holdings for non-compliance with Visa's rules. Cards issued through Wave Crest, including Xapo's, were cut off in the weeks that followed. The Bitcoin debit card layer that had circumvented Buenos Aires' banking block was itself killed by the card network that powered it. By early 2018, the Xapo workaround was gone.

What It DemonstratedWhat It Demonstrated

The Argentine episode showed that Bitcoin could help route around censorship in the traditional financial system, not directly but through infrastructure built on top of it. When Buenos Aires ordered its banks to block Uber, Bitcoin holders had an off-ramp the city couldn't reach. The card network eventually closed it. But for a year and a half, it worked.

Part of an ongoing series on Bitcoin history. This event falls on July 6, 2016.