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Crypto cards promise bankless finance but deliver banks, fees, and surveillance. A deep dive into why the model breaks long-term.
My general thesis is that crypto cards are a temporary solution. They address two well-known problems: bringing crypto to the masses and ensuring it is accepted as a payment method worldwide.
Crypto cards are still cards. If someone truly believes in crypto values and a card-dominated future, that vision may need rethinking.
Crypto cards will most likely die long-term, but not traditional ones. Crypto cards add another layer of abstraction: it’s not a pure crypto use case. Card issuers are still banks. Yes, they have a different logo, different design, different UX, but as I said before, it’s abstraction, and abstracting makes things function differently and more conveniently for the end user, but the processes stay the same.
Different L1s and rollups obsess over comparing their TPS and infrastructure to Visa and Mastercard. And it has been a goal for years: the goal “to replace” or if you’re more contrarian “to dethrone” Visa, Mastercard, AmEx, and other payment processors.
This goal is not possible with crypto cards they’re not a replacement, they bring even more value to Visa and Mastercard.
How come the industry that has always aimed for permissionlessness and decentralization now wants to hand all of that over to payment processors?
Most of your favorite crypto card companies don’t do anything besides slapping their logo on the card, and that’s it. They just ride on narratives, they won’t be around in a few years, and digital cards issued until 2030 won’t function until then.
I will explain later in this writing how easy it is to make your own crypto card these days in the future, you can even make your own!
The best comparison I’ve managed to come up with is app-specific sequencing. Yes, the idea that apps can navigate their own transactions and profit from it is cool, but this is temporary: infrastructure costs are going down, communication is maturing, and the economic problems are a layer higher, not lower.
(Here is a good talk about ASS by @mvyletel_jr, if you’re interested).
Same with crypto cards: yes, you can deposit crypto and your card will convert it to fiat so you can pay, but centralization and permissioned access are still issues.
It certainly is helpful temporarily: retailers don’t need to adopt new payment methods, and crypto spending is kind of invisible.
But this is just another step toward what most crypto believers want:
Adding one more layer of abstraction adds one more layer of fees: spread fees, withdrawals, transfers, or even custody yields sometimes. It might seem insignificant to you, but hey, it’s compounding: a penny saved is a penny earned.
I’ve observed another thesis: people think they’re unbanked when they use a crypto card. Some even believe they’ve gone bankless.
Of course, that’s not true. A bank sits behind every crypto card. That bank must report your information to its local government. Not all data, of course, but at least some of it.
If you’re an EU citizen or resident, the government knows your interest earned on bank accounts, large suspicious transactions, certain investment income, account balances, and more. If the underlying bank is American, they know even more.
Surprisingly enough, that is both good and bad from a crypto perspective.
You might argue that crypto cards are great because they’re easy to set up. You download the app and complete KYC. Verification takes one or two minutes. Then you top up with crypto and you’re ready to go. This ease and convenience is a killer feature. However, it’s still not accessible to everyone.
People in Russia, Ukraine, Syria, Iraq, Iran, Myanmar, Lebanon, Afghanistan, and much of Africa are excluded from using crypto for daily spending. This is the case unless they have residency in another country.
But hey, those are “only” 10–20 countries that aren’t eligible for most crypto cards. What about the other 150+ countries? This isn’t about the eligible majority. It’s about crypto values: a decentralized network of equal nodes, equal access to finance, and equal rights for everyone. This is not present in crypto cards because they’re simply not crypto.
Max Karpis broke it down perfectly here on why “neobanks” are designed to fail at first.
For reference, the real time I actually paid with crypto was when I booked my flight tickets on Trip.com. They recently added an option to pay with stablecoins. You pay directly from your wallet. This option is accessible to everyone worldwide.
Don’t use Booking, use Trip for real crypto payments. My honest recommendation.
Here, it is a real crypto use case and a real crypto payment. I believe the endgame will look like this. Wallets will improve UX for spending and payments. Or, less likely, they will turn into crypto cards if crypto payments are adopted in some form.
Another interesting observation that I’ve made is that self-custodial crypto cards function similarly to cross-chain bridges.
Self-custodial crypto cards work differently. They function like liquidity bridges. You lock funds in crypto on Chain A and unlock them as fiat on Chain B, in the real world.
In the crypto card landscape, this bridge plays the role shovels did in the California Gold Rush. It is the valuable, reliable connection between crypto-native users and businesses that want to issue their own cards.
@stablewatchHQ did a really good job highlighting this kind of bridge as essentially a Card-as-a-Service (CaaS) model. This is the most overlooked aspect by everyone talking about crypto cards. These CaaS platforms provide the infrastructure to launch their own branded card.
Probably half of your favorite crypto cards are powered by @raincards, and you probably haven’t heard of them. This is one of the most foundational protocols in neobank systems. It supports nearly every component behind crypto cards. What companies do next is simply add their logo on top of it. That may sound harsh, but it’s close to reality.
Made this diagram for you to understand how Rain functions and how easy it is to set up a crypto card.
Rain enables companies to launch crypto cards. Its infrastructure could last beyond crypto, thanks to its execution. So yes, don’t be delusional. Teams don’t need to raise tens of millions of dollars to launch a crypto card. They don’t need that they need Rain.
The reason I’m talking about Rain so much is that people overestimate the effort needed to launch a crypto card. Maybe I’ll write a separate article on Rain in the future. It’s a really underrated piece of technology.
Crypto cards don’t lack privacy or anonymity by design. People who push crypto cards ignore this problem while hiding behind so-called “crypto values.”
Of course, the situation with crypto cards doesn’t offer any near pseudoprivacy like traditional crypto does, because you do KYC when you open a crypto card (because you don’t really open a crypto card, you open a bank account).
Cash is still here (the only form of anonymity, except that the seller sees you), and it will still be around for a long time. But eventually, everything will be converted into digital. Current digital systems don’t benefit the privacy of spenders in any way: you spend more, you pay more fees, and in return, they know even more about you. Good trade!
Privacy is a luxury, and it will continue to be so in the crypto card landscape. An interesting thought is that if we achieve really good privacy to an extent that companies and entities are willing to pay for it (not the Facebook way, but with our own consent), it might become one of the currencies of the future, if not the only one, in a no-job, AI-driven world.
The answer is pretty simple locking users into ecosystems.
Most of the non-custodial cards choose L2s (MetaMask on @LineaBuild) or separate L1s (Plasma Card on @Plasma). Ethereum or Bitcoin is usually impractical for such operations because of high costs and finality. There are some cards that use Solana, but I’m not here to start another war, it’s still a minority.
Of course, companies choose different blockchains not only because of their infrastructure but also because of monetary benefits.
But ConsenSys made a smart decision by building its card on Linea. This choice locks users into the ecosystem. They get used to good UX through something they use every day. Linea attracts liquidity, volume, and all other metrics in a natural way, not because of liquidity mining campaigns or begging users to bridge.
This approach mirrors Apple’s strategy when the iPhone launched in 2007. People stayed on iOS and grew so accustomed to it that they could no longer move to another ecosystem. You should never underestimate the power of habit.
After all these thoughts, I came to the conclusion that @ether_fi is probably the only viable real crypto card that aligns most with the crypto ethos (this research is not sponsored by EtherFi, but even if it were, I wouldn’t mind).
In most crypto cards, they sell the crypto that you deposit and top up your balance with cash (similar to a liquidity bridge that I described before).
It’s different in EtherFi: the system never sells your crypto; they give you cash as a loan and use your crypto to yield rewards.
EtherFi functions similarly to Aave with this model. While most DeFi users are dreaming of the ability to take a cash loan against their crypto assets seamlessly, it’s already here. You might wonder: “But isn’t it the same thing? I top up with crypto and use a crypto card like a normal debit card. I don’t need an extra step.
Well, the problem is: selling your crypto is a taxable event, sometimes even more taxable than daily purchases. And with most cards, governments tax each transaction. You end up paying more, and using a crypto card still doesn’t mean going bankless.
Most cards try to pretend they’re crypto, while in reality they are just liquidity bridges. By contrast, EtherFi puts crypto users first. Instead of trying to bring crypto to the masses, they bring crypto to locals. Those locals spend in front of everyone else, until the masses realize how cool it is. Out of all crypto cards, EtherFi is possibly the only one that will survive over the years.
I like to think of crypto cards as a field for experimentation, but unfortunately, most of the teams you see just capitalize on the narrative without giving proper credit to the underlying systems and the people who work on these cards.
Let’s see where progress and innovation will lead us. Currently, we see a lot of globalization (horizontal growth) of crypto cards, but we don’t see enough vertical growth, which is needed in the early days of a technology like crypto cards designed for spending.
