Living without a bank card is one thing, but suffering from the problems of having one is another.
Written by: Pavel Paramonov, founder of the cryptocurrency research organization Hazeflow
Compiled by: Eric, Foresight News
My overall argument is that cryptocurrency cards are merely a temporary solution, addressing two problems we all know: bringing cryptocurrency to the masses and ensuring that cryptocurrency is globally accepted as a means of payment.
Cryptocurrency cards are still cards after all. If a person truly identifies with the values of cryptocurrency and believes that the future will be dominated by cards, they may need to rethink their vision.
All cryptocurrency card companies will eventually perish.
In the long term, cryptocurrency cards are likely to face extinction, while traditional cards will not. Cryptocurrency cards add an extra layer of abstraction: they are not purely cryptocurrency applications, as the issuing institutions are still banks. Yes, they have different identifiers, designs, and user experiences, but as I mentioned earlier, these are merely differences in abstraction layers. Abstraction makes it easier for end users to use, but the underlying processes remain the same.
Different L1 and Rollup are obsessed with comparing their TPS and infrastructure with Visa and Mastercard. For years, this has been the industry's goal: to 'replace' or, more radically, to 'overthrow' the dominance of payment giants like Visa, Mastercard, and American Express.
Cryptocurrency cards cannot achieve this goal—they are not substitutes, but rather create more value for Visa and Mastercard.
These traditional institutions remain key gatekeepers, possessing absolute power to set rules, define compliance standards, and more;
Most importantly, they reserve the right to ban your card, company, or even bank at any time.
Why is this industry, which has always pursued permissionless and decentralized ideals, now handing over all power to payment processors?
Your card is Visa, not Ethereum;
Your card is a traditional bank, not a MetaMask wallet;
You are spending fiat currency, not cryptocurrency.
Most of your favorite cryptocurrency card companies are likely just putting a logo on the card. They survive on hype and will disappear in a few years, and digital cards issued before 2030 will also no longer be usable.
The following sections of this article will describe how easy it is to create a cryptocurrency card today; in the future, you may even be able to issue one yourself.
Same issue + more transaction fees
The best analogy I can think of is Application-Specific Sorting (ASS). Sure, it's cool that applications autonomously handle transactions and profit from them, but this is only temporary: infrastructure costs are decreasing, communication technologies are maturing, and economic issues are actually deeper, not shallower.
(If interested, refer to @mvyletel_jr's excellent talk on ASS).
Cryptocurrency credit cards are the same: while they support deposits of cryptocurrencies and allow spending through card conversion to fiat, centralization and permissioned access remain the crux of the issue.
In the short term, it is indeed convenient: merchants do not need to integrate new payment methods, and cryptocurrency consumption is also highly discreet.
But this is merely a transition to the ultimate goal of cryptocurrency believers:
What is needed is: direct payment using stablecoins, Solana, Ethereum, Zcash
What is not needed is: indirect payments through USDT → cryptocurrency card → bank → fiat
Each additional layer of abstraction means extra costs: spread fees, withdrawal fees, transfer fees, and sometimes even custody fees. These costs may seem trivial, but do not forget the compounding effect: every penny saved is earned.
Using a cryptocurrency card does not mean you do not need a bank account or are 'bankless'.
Another perspective I see is that people believe using cryptocurrency cards means they do not have a bank account or are bankless.
This is clearly inaccurate. There are always banking institutions behind cryptocurrency cards, and these banks are obligated to submit part of your information to local governments—though not all data, at least key content is included.
If you are a citizen or resident of the European Union, the government has control over your bank account interest income, large suspicious transactions, specific investment returns, account balances, and other information. If the issuing bank is located in the United States, the range of information that the government has will be broader.
Surprisingly, from a cryptocurrency perspective, this has both advantages and disadvantages.
The advantage lies in transparency and verifiability, but the same rules apply when using ordinary debit or credit cards issued by local banks.
The downside is that it is neither anonymous nor pseudonymous: banks can still see your name rather than your EVM or SVM address, and you still need to complete KYC verification.
Restrictions still exist
Some may think that cryptocurrency cards are easy to activate: download the app, complete KYC, wait for 1-2 minutes for verification, and you can use them by topping up with cryptocurrency. Indeed, this convenience is a killer feature, but not everyone can enjoy it.
Russia, Ukraine, Syria, Iraq, Iran, Myanmar, Lebanon, Afghanistan, and most African countries—citizens in these regions cannot use cryptocurrency for daily consumption without residence rights in other countries.
But wait, this is just a dozen or so countries that cannot use cryptocurrency cards; what about the other 150+ countries? The focus is not on the eligibility of the majority but on the core value of cryptocurrency: equal nodes in a decentralized network, equal financial access, and equal rights for all. Cryptocurrency cards fail to embody these values because they are not truly cryptocurrencies at their core.
Max Karpis incisively analyzed why 'neobanks' are doomed to fail (the core point is that crypto-friendly new banks have no advantage over Revolut; the moat built by large enterprises' scalability cannot be easily shaken by 'former employees of big companies'; as long as the giants want, they can open such banks at any time and have a base of tens of millions of users).
For reference, my real experience of using cryptocurrency for payment was when booking a flight on Ctrip. They recently added a stablecoin payment option, allowing users to pay directly from their wallets, of course, this service is open to users worldwide.
What is presented here are real cryptocurrency application scenarios and actual payment cases. I believe the final form will be like this: wallets will optimize user experience for consumption and payment scenarios, or (though less likely) directly evolve into cryptocurrency cards (if crypto payments are widely adopted in some form).
The functionality of cryptocurrency cards is similar to liquidity bridges.
Another interesting phenomenon I have observed is that self-custodied cryptocurrency cards function similarly to cross-chain bridges.
This applies only to self-custodied cards; cards issued by centralized exchanges do not have self-custody features, so exchanges like Coinbase do not need to mislead users by claiming they control user funds.
One important use of centralized exchanges (especially the cryptocurrency cards they issue) is to provide reliable proof for government funding verification, visa applications, and other scenarios. When you use a cryptocurrency card tied to a centralized exchange account, you are technically still within the same ecosystem.
However, self-custodied cryptocurrency cards are different: their operation is similar to a liquidity bridge, where users lock cryptocurrency assets on Chain A and unlock funds (fiat) on Chain B (the real world).
The cross-chain mechanism in the field of cryptocurrency cards is akin to the shovels during the California Gold Rush—it is a valuable security channel that connects native cryptocurrency users with businesses looking to issue their own cards.
Stablewatch insightfully points out that these types of bridges are essentially a 'Card as a Service (CaaS)' model—this is the most overlooked core in all discussions about cryptocurrency cards. These CaaS platforms provide the infrastructure for brands to issue their own branded cards.
Rain: How did cryptocurrency cards come about?
About half of the cryptocurrency cards you love are likely supported by Rain's technology, and you may have never heard of it. This is one of the foundational protocols in the new banking system because it carries all the core functions behind cryptocurrency cards. Other companies just need to slap their logo on it (this may sound harsh, but it is quite close to the truth).
Rain allows companies to easily launch cryptocurrency cards; frankly, its infrastructure capabilities are even sufficient for sustained development beyond the cryptocurrency space. So don’t fantasize that teams need to raise tens of millions of dollars to launch cryptocurrency cards—they don’t need that funding; what they need is Rain.
I emphasize Rain repeatedly because people severely overestimate the investment required to launch a cryptocurrency card. Perhaps in the future, I will write separately about Rain, as this technology is indeed seriously underestimated.
Cryptocurrency cards lack privacy and anonymity.
The lack of privacy and anonymity in cryptocurrency cards is not a defect of the cards themselves, but rather an issue that those advocating for cryptocurrency cards deliberately ignore under the guise of so-called 'cryptocurrency values'.
There are no widely applicable privacy features in the cryptocurrency space. Pseudo-privacy (pseudo-anonymity) does exist; we do not see names, only addresses.
But if you are ZachXBT, Igor Igamberdiev from Wintermute, Storm from Paradigm, or anyone with strong on-chain analysis capabilities, you can significantly narrow down the address ownership range.
Of course, the situation with cryptocurrency cards is far from the pseudo-privacy of traditional cryptocurrencies, as you must complete KYC verification when opening a card (in reality, you are not opening a card, but establishing a bank account).
If you are in the European Union, cryptocurrency card service providers will still submit some data to the government for tax or other governmental purposes.
Now, you've provided regulators with a new tracking avenue: linking cryptocurrency addresses with real identities.
Personal data will be the currency of the future
Cash still exists (aside from the fact that the seller can see you, this is the only anonymous payment method), and will circulate for a long time. But everything will eventually become digital. The current digital system offers no benefit to consumer privacy: the more you spend, the more transaction fees you incur, only to gain a deep understanding of your information by the other party; it’s quite a profitable deal...
Privacy is a luxury, and it will be the same in the field of cryptocurrency cards. Interestingly, if we can achieve truly high-quality privacy protection that companies and entities are willing to pay for (not the Facebook model, which requires user consent), in a world dominated by artificial intelligence with no job opportunities, privacy may become one of the currencies of the future, or even the only currency.
If it's destined to fail, why are Tempo, Arc Plasma, and Stable still building?
The answer is simple: to lock users into the ecosystem.
Most non-custodial cards choose L2 solutions (e.g., MetaMask chose Linea) or L1 solutions (e.g., Plasma's Plasma Card). Ethereum or Bitcoin are usually not suitable for such operations due to high costs and finality issues. While a few cards use Solana, I do not wish to spark a debate here, as their share remains small.
Companies choose different blockchains not only based on infrastructure considerations but also economic interests.
MetaMask chooses the Linea underlying architecture, not because it is the fastest or the most secure, but because Linea is part of the ConsenSys ecosystem.
I specifically use MetaMask as an example because of its adoption of Linea. It is well-known that Linea is hardly noticed, having no chance of competing with L2 solutions like Base or Arbitrum.
But ConsenSys made a wise decision by embedding Linea into its product's infrastructure—users are thus locked into the ecosystem. They gradually form habits through the high-quality UX of daily use. Linea naturally attracts liquidity, transaction volume, and various metrics, rather than relying on liquidity mining activities or forcing users to operate cross-chain.
This strategy is similar to Apple's approach when launching the iPhone in 2007: once users develop habits within the iOS ecosystem, it becomes difficult to switch to other systems. Never underestimate the power of habit.
Ether.fi may have provided the only viable solution.
Upon deep reflection, I concluded that Etherfi might be the only cryptocurrency card that truly aligns with the spirit of cryptocurrency (this research was not sponsored by EtherFi; even if it were, it wouldn’t matter).
Most cryptocurrency cards will liquidate the cryptocurrency assets deposited by users and then use cash to top up the account balance (similar to the liquidity bridge mechanism I described earlier).
The model of ether.fi is different: the system will never sell your cryptocurrency; they provide cash in the form of loans and profit from your cryptocurrency.
The operational model of ether.fi is similar to Aave. While most DeFi users are still dreaming of seamlessly collateralizing cryptocurrency assets to obtain cash loans, this service has already been realized. You might question, 'Isn’t this the same functionality? I can just top up cryptocurrency and use a cryptocurrency card like a regular debit card, so why go through the extra step?'
The problem is that selling cryptocurrency is a taxable activity, sometimes even easier to tax than daily consumption. Most cryptocurrency cards will tax each transaction, so you need to pay more taxes to the government (again emphasizing, using cryptocurrency cards does not mean escaping the banking system).
Ether.fi cleverly avoids this issue—you are not actually selling crypto assets, but rather using them as collateral to obtain loans. Just based on this feature (along with no fees for USD, cash back, and multiple benefits), ether.fi has become the best example of the fusion of DeFi and traditional finance.
While most cryptocurrency credit cards try to disguise themselves as liquidity bridges, ether.fi truly prioritizes cryptocurrency users, rather than focusing on promoting cryptocurrency to the masses: they allow local residents to access cryptocurrency and guide them to spend in front of the public until the masses realize how cool this consumption method is. Among all cryptocurrency cards, ether.fi may be the only one capable of withstanding the test of time.
I like to view cryptocurrency cards as an experimental field; however, it is regrettable that most teams merely exploit narratives without giving due recognition to the underlying systems and developers. Let’s wait and see where progress and innovation lead us. Currently, cryptocurrency cards are showing a significant trend towards globalization (horizontal expansion), but lack the necessary vertical development, which is crucial in the early stages of consumer technologies like cryptocurrency cards.
