Cryptocurrency cards exist as a bridge connecting traditional payments and the crypto world, facing issues such as centralization and compliance dependence, which contradict the decentralized spirit of cryptocurrencies. The article argues that cryptocurrency cards are a transitional solution and proposes EtherFi as a model that aligns with crypto values, showcasing the possibilities of integrating DeFi with traditional finance.
Article Author: Rhythm BlockBeats
Source: @paramonoww
Editor's Note: Cryptocurrency cards were once seen as a bridge between traditional payment systems and the crypto world, but with the industry's development, the limitations of this model have become increasingly apparent: centralization, compliance dependence, lack of privacy, additional fees, and even contradicting the core spirit of cryptocurrencies.
This article delves deep into the essence of crypto cards, pointing out that they are merely transitional solutions and not true innovations in decentralized payments. At the same time, the article proposes EtherFi as one of the few models that align with crypto values, showcasing the potential for DeFi and TradFi integration.
Here is the original text:
My overall point is that crypto cards are just a temporary solution to address two problems we are all familiar with: first, bringing cryptocurrency to the masses; second, ensuring that cryptocurrency can be accepted as a payment method globally.
In the end, a crypto card is still just a card. If someone truly identifies with the core values of cryptocurrency but believes that the future will be dominated by cards, you may need to rethink your vision.
All crypto card companies will eventually disappear.
In the long run, crypto cards are likely to disappear, but traditional cards will not. Crypto cards merely add a layer of abstraction and are not a pure cryptocurrency application scenario. The card issuers are still banks. Yes, they may have different logos, different designs, and different user experiences, but as I said before, this is merely abstraction. Abstraction makes things more convenient for users, but the underlying processes do not change.
Different public chains and Rollups have been obsessed with comparing their TPS and infrastructure to Visa and Mastercard. This goal has existed for years: either to 'replace' or more aggressively to 'disrupt' Visa, Mastercard, AmEx, and other payment processing institutions.
But this goal cannot be achieved through crypto cards—they are not substitutes; instead, they add more value to Visa and Mastercard.
These institutions remain key 'gatekeepers', they have the authority to set rules, define compliance standards, and even ban your cards, companies, or even banks if necessary.
In an industry that has always pursued 'permissionless' and 'decentralized', why now hand everything over to payment processors?
Your card is Visa, not Ethereum. Your card is a traditional bank, not MetaMask. You are spending fiat, not cryptocurrency.
Those crypto card companies you love have done almost nothing except slap their logo on the card. They merely leverage the narrative and will disappear in a few years, while the digital cards issued until 2030 won’t actually function by then.
I will explain later just how easy it is to create a crypto card now— in the future, you might even be able to make one yourself!
The same problem + more fees.
The best analogy I can think of is 'application-specific sorting'. Yes, applications can autonomously handle transactions and profit from them; it's a cool idea, but it's only temporary: infrastructure costs are decreasing, communication is maturing, and economic issues exist at a higher level, not a lower one. (If you're interested, check out @mvyletel_jr's great talk on ASS.)
The same goes for crypto cards: yes, you can top up with cryptocurrency, and the card will convert it to fiat for payment, but the issues of centralization and permissioned access still exist.
It certainly helps in the short term: merchants do not need to adopt new payment methods, and crypto spending is almost 'invisible'.
But this is merely a transitional step toward the goal that most crypto believers truly desire:
Demand: Pay directly with stablecoins, Solana, Ethereum, Zcash.
No need for an indirect path: USDT → crypto card → bank → fiat.
Adding a layer of abstraction also adds a layer of fees: spreads, withdrawal fees, transfer fees, and sometimes even custodial yields. These fees seem trivial, but they compound: saving a penny is like earning a penny.
Using a crypto card does not mean you are 'unbanked' or 'de-banked'.
Another misconception I observed is that people think using a crypto card means they do not have a bank account or that they have achieved de-banking. Of course, this is not true. Under the label of crypto cards, there is still a bank, and banks must report some of your information to local governments. Not all data, but at least some key data.
If you are a citizen or resident of the European Union, the government will know about your bank account interest, large suspicious transactions, certain investment income, account balances, etc. If the underlying bank is from the United States, they know even more.
From a crypto perspective, it has both pros and cons. The benefits are transparency and verifiability, but the same rules apply to using a standard debit or credit card issued by a local bank. The downside is that it is neither anonymous nor pseudonymous: what banks see is your name, not an EVM or SVM address, and you still need to do KYC.
Restrictions still exist.
You might say that crypto cards are great because they are really easy to set up: download the app, complete KYC, wait 1-2 minutes for verification, top up with cryptocurrency, and then you can use it. Yes, this is indeed a killer feature, extremely convenient, but not everyone can use it.
Russia, Ukraine, Syria, Iraq, Iran, Myanmar, Lebanon, Afghanistan, and half of Africa—citizens of these countries cannot use cryptocurrency for everyday spending without residency rights in other countries.
But hey, that's just 10-20 countries that don't qualify; what about the other 150+ countries? The issue is not whether most people can use it, but rather the core value of crypto: a decentralized network where nodes are equal, financial equality exists, and everyone enjoys equal rights. This does not exist in crypto cards, as they are not 'crypto' at all.
Max Karpis perfectly explains here why 'new banks' were destined to fail from the start.
As a reference, the scenario where I actually use cryptocurrency for payment is when booking flights on Trip.com. They recently added an option to pay with stablecoins, allowing direct payment from your wallet, and of course, anyone in the world can use it.
Here is the real application scenario for cryptocurrency, and it is a genuine crypto payment. I believe the ultimate form will look like this: wallets will be specifically optimized for payment and consumer user experience, or (less likely) wallets will evolve into crypto cards if crypto payments are widely adopted in some way.
The function of crypto cards is similar to liquidity bridges (Rain).
I have an interesting observation: the way self-custody crypto cards operate is very similar to cross-chain bridges.
This only applies to self-custody cards: cards issued by centralized exchanges (CEX) are not self-custody, so exchanges like Coinbase have no obligation to make users mistakenly believe that their funds are under their control.
A reasonable use case for CEX cards is that they can serve as proof of funds for government, visa applications, or similar scenarios. When you use a crypto card tied to a CEX balance, you are still within the same ecosystem.
Self-custody crypto cards are different: they operate similarly to liquidity bridges, where you lock funds (cryptocurrency) on chain A and then unlock funds (fiat) on chain B (the real world).
This 'bridge' serves a role in the crypto card space similar to that of a shovel during the California Gold Rush: it is a key secure channel connecting crypto-native users and businesses that want to issue their own cards.
@stablewatchHQ's analysis of this bridge is very insightful, suggesting it is essentially a Card-as-a-Service (CaaS) model. This is the aspect that is most easily overlooked by those discussing crypto cards. These CaaS platforms provide the infrastructure for businesses to launch their own branded cards.
Rain: How Crypto Cards Came to Be
Half of your favorite crypto cards may be powered by @raincards, and you might have never heard of it. Rain is one of the foundational protocols in the new banking system because it handles almost all the core components behind crypto cards. All the remaining companies have to do is slap their logo on it (sounds harsh, but the reality is close to that).
Rain enables companies to quickly launch their own crypto cards, frankly, Rain's execution capability could even exist beyond the crypto space in the long term. So, stop fantasizing that teams need to raise tens of millions of dollars to issue crypto cards; they don't need that funding—they just need Rain.
The reason I emphasize Rain is that people generally overestimate the effort required to issue crypto cards. Maybe I will write a separate article about Rain in the future because it is truly an underrated technology.
Crypto cards lack privacy and anonymity.
The lack of privacy or anonymity in crypto cards is not an issue with the cards themselves, but rather an issue that those promoting crypto cards deliberately ignore as they hide behind the so-called 'crypto values'.
Privacy is not a widely used feature in the crypto realm; pseudo-privacy (pseudonymity) does exist because what we see are addresses, not names. However, if you are ZachXBT, Igor Igamberdiev from Wintermute, Storm from Paradigm, or others with strong on-chain analysis capabilities, you can significantly narrow down the real identity corresponding to a specific address.
Of course, the situation with crypto cards lacks even the pseudo-privacy of traditional cryptocurrencies since you must complete KYC when you activate a crypto card (in reality, you are not activating a crypto card; you are opening a bank account).
If you are in the European Union, companies providing crypto cards will still send some of your data to the government for tax or other purposes that the government needs to know. Now, you have given regulators a new opportunity to track you: linking your crypto address to your real identity.
Personal data: The currency of the future.
Cash still exists (the only form of anonymity, except that the seller can see you), and it will continue to exist for a long time. But eventually, everything will be digitized. The current digital systems do not provide any benefits in terms of privacy for consumers: the more you spend, the higher the fees you pay, and in exchange, they learn more about you. What a 'good deal'!
Privacy is a luxury, and in the realm of crypto cards, it will continue to be so. An interesting idea is that if we achieve truly good privacy, even making businesses and institutions willing to pay for it (not like Facebook, but on terms we agree upon), it could become the currency of the future, perhaps even the only currency in a jobless, AI-driven world.
If everything is destined to fail, why are we still building Tempo, Arc Plasma, Stable?
The answer is simple— to lock users into the ecosystem.
Most non-custodial cards choose L2 (for example, MetaMask using @LineaBuild) or independent L1 (for instance, Plasma Card using @Plasma). Due to high costs and finality issues, Ethereum or Bitcoin are usually not suitable for such operations. Some cards use Solana, but that is still a minority.
Of course, companies choose different blockchains not only for infrastructure but also for economic incentives.
MetaMask uses Linea not because Linea is the fastest or the safest, but because Linea and MetaMask are both part of the ConsenSys ecosystem.
I specifically used MetaMask as an example because it uses Linea. Everyone knows that almost no one uses Linea; it lags far behind Base or Arbitrum in the L2 competition.
But ConsenSys made a smart decision to place Linea at the base of their cards because it locks users into the ecosystem. Users are accustomed to good user experiences rather than through things they use daily. Linea naturally attracts liquidity, transaction volume, and other metrics, rather than relying on liquidity mining activities or begging users to cross-chain.
This strategy is similar to what Apple did when it launched the iPhone in 2007, keeping users on iOS to the point where they can't switch to other ecosystems. Never underestimate the power of habit.
EtherFi is the only viable crypto card.
After these reflections, my conclusion is that @ether_fi may be the only crypto card that truly aligns with the spirit of crypto (this research was not sponsored by EtherFi; even if it were, I wouldn't mind).
In most crypto cards, the cryptocurrency you top up is sold off and then your balance is replenished with cash (similar to the liquidity bridge I described earlier).
EtherFi is different: the system never sells your cryptocurrency; instead, it gives you a cash loan and earns returns on your crypto assets.
EtherFi's model is similar to Aave. Most DeFi users dream of being able to seamlessly use crypto assets to secure cash loans, and this capability has already emerged. You might ask, 'Isn't this the same? I can top up cryptocurrency and spend with a crypto card just like a regular debit card; this extra step is unnecessary, right?'
The problem is that selling your cryptocurrency is a taxable event and sometimes even easier to tax than everyday spending. In most cards, every operation you make could be taxed, leading you to pay more taxes (again, using crypto cards does not mean de-banking).
EtherFi addresses this issue to some extent because you are not actually selling cryptocurrency; you are just using it to secure a loan.
Just based on this (along with no foreign exchange fees for the dollar, cash back, and other benefits), EtherFi becomes the best example of the intersection of DeFi and TradFi.
Most cards try to pretend they are crypto products, but in reality, they are just liquidity bridges, while EtherFi truly caters to crypto users, not just to bring cryptocurrency to the masses: it allows crypto users to spend locally until the masses realize how cool this model is. Among all crypto cards, EtherFi may be the only project that can survive in the long term.
I think crypto cards are a testing ground, but unfortunately, most teams you see are just leveraging the narrative without giving due recognition to the underlying systems and developers.
Let's see where progress and innovation will take us. Currently, we are witnessing the globalization of crypto cards (horizontal growth) but a lack of vertical growth, which is precisely what this payment technology needed in its early stages.
