The dilemma of crypto cards: the eternal struggle between centralized payments and decentralized ideals

The Fundamental Issues Behind Surface-Level Convenience

When mentioning crypto cards, many people’s first thought is convenience: download an app, complete identity verification, top up digital assets, and instantly spend just like using a traditional debit card. This user experience is indeed highly compelling, but this convenience masks a fundamental question—are crypto cards a solution or just another layer of packaging?

When we examine the operational logic of crypto cards more closely, we find that they are essentially an intermediary layer rather than a true crypto application. The digital assets users top up are converted into fiat currency, transactions are completed within the banking system, and ultimately you are still spending traditional currency using the infrastructure of Visa or Mastercard. Logos can change, user interfaces can be optimized, but the underlying architecture remains unchanged—it is still controlled by traditional financial gatekeepers.

Many blockchain projects and Layer 2 solutions have long dreamed of replacing traditional payment giants, proposing grand visions of “disruption.” However, the emergence of crypto cards instead consolidates the position of these giants because no matter how many users switch to crypto cards, Visa and Mastercard remain the ultimate rule-makers.

Cost Accumulation and Tax Traps

On the surface, crypto cards merely add a conversion layer, but the costs brought by this abstraction are often overlooked. Every transaction can incur spreads, withdrawal fees, transfer fees, and sometimes even commissions for custodial services. These seemingly insignificant fees compound over years, eventually becoming a substantial expense.

A more hidden issue is taxation. When you top up a crypto card with stablecoins, tax authorities in many regions treat this as a taxable event. Most crypto cards effectively sell your digital assets and then top up the fiat balance, and each such operation can trigger capital gains tax. As transaction frequency increases, tax burdens can become a significant problem.

If crypto cards truly represent the future, users should expect lower friction and costs, not the opposite.

Privacy Illusions and Regulatory Reality

Many users mistakenly believe that crypto cards can bring “debanking” or enhanced privacy protection. In fact, when you activate a crypto card, you must complete KYC (Know Your Customer) procedures, meaning the banking system has access to your real identity. In regions like the EU or the US, relevant authorities can access your account activity, transaction records, and balance information, and use this for regulatory reporting.

While the crypto space does have a concept of pseudo-anonymity—blockchain addresses do not directly reveal personal names—security teams or law enforcement agencies with on-chain analysis capabilities can easily link addresses to real identities. Crypto cards eliminate this last layer of pseudo-anonymity because your banking information is directly linked to your crypto address.

Regulators now have a new tracking tool: they can associate your blockchain address with your real identity. This is completely contrary to the privacy ethos many crypto enthusiasts pursue.

Geographic Restrictions and the Illusion of Inclusivity

The advertised global availability of crypto cards faces many practical limitations. Residents of Russia, Ukraine, Syria, Iran, Afghanistan, and over 20 other countries cannot access these services. Most of Africa is also excluded. Even in other regions, onboarding processes and compliance requirements vary, leading to significant differences in user experience and accessibility.

This exposes the fundamental contradiction of crypto cards: they claim to embody the inclusive spirit of cryptocurrencies but in reality inherit the exclusionary logic of traditional finance. A truly decentralized payment system should be borderless and non-discriminatory, but crypto cards replicate the geographic filtering mechanisms of banks.

Ecosystem Lock-in and Apple-like Strategies

Interestingly, many crypto card projects adopt strategies similar to traditional tech giants. For example, MetaMask’s crypto card is deployed on the Linea network. The stated reason is infrastructure choice, but the real purpose is ecosystem lock-in—getting users accustomed to a specific blockchain, thereby encouraging continued use of related tokens and applications.

Just as Apple created ecosystem barriers with the iPhone in 2007, keeping consumers within iOS through excellent user experience, crypto card projects attempt to lock users into specific chains through daily convenience. Linea is not the most competitive Layer 2 choice—Base and Arbitrum offer better performance—but ConsenSys (the parent company of Linea and MetaMask) opts for ecosystem integration rather than pure performance optimization.

The power of this strategy lies in the power of habit—once users get used to a system, switching costs and psychological barriers increase dramatically.

Where Is True Innovation?

There are some exceptions in the industry. Trip.com recently launched a stablecoin payment feature that represents a different approach—users can initiate payments directly from self-custodial wallets without intermediaries. This is the true application scenario of cryptocurrencies: transactions occur entirely on the blockchain, accessible globally, with no geographic restrictions.

In comparison, EtherFi offers a noteworthy model. Unlike most crypto cards (which sell users’ digital assets), EtherFi employs a collateralized loan model—users pledge crypto assets as collateral to obtain fiat loans for spending, while their assets remain untouched and continue generating yield.

The brilliance of this design is that it avoids taxable events. Since assets are never sold, users do not need to pay capital gains tax—only the interest on the loan needs to be taxed. Furthermore, EtherFi demonstrates the real possibility of integrating DeFi with traditional finance—rather than simply wrapping traditional systems in a crypto shell.

Why Are Crypto Card Companies Still Investing?

If crypto cards face so many structural issues, why do projects like Tempo, Arc Plasma, and Stable continue development? The answer is straightforward—user lock-in and short-term profits.

Most non-custodial cards operate on Layer 2 or independent blockchains. Ethereum or Bitcoin’s cost structures are unsuitable for high-frequency payments, but Layer 2 solutions can offer sufficient cost-effectiveness. When projects choose specific blockchains, economic incentives often outweigh technical advantages. By deploying crypto cards on their own or related ecosystems’ chains, project teams can attract users to accumulate assets there, creating path dependency.

From a business perspective, this is a reasonable short-term strategy. But from a long-term industry development standpoint, this approach essentially copies the oligarchic logic of traditional finance rather than deconstructing it.

The Technical Truth: Rain and Card-as-a-Service

A little-known but crucial fact is that many mainstream crypto cards are supported by Rain infrastructure. Rain is a key protocol in the new banking system, abstracting core functions of crypto cards—asset conversion, payment processing, wallet integration, etc.

What does this mean? It means any company with some technical capability can quickly launch its own branded crypto card without building the underlying infrastructure from scratch. Issuing a crypto card becomes extremely simple—just add logos, design, and branding on top of Rain’s platform.

This further confirms the previous point: most crypto card projects are essentially brand-layer innovations rather than technological breakthroughs. When issuing crypto cards becomes so easy, investors should reevaluate the claimed “moats” of these projects.

Transition or Endgame?

If we must categorize crypto cards, the most accurate description is: they are a transitional solution connecting the existing financial system with the future crypto world. But transitional solutions are usually not the endpoint—they are temporary patches.

A classic industry analogy is application-specific sorting (ASS). These systems initially seem promising because they optimize efficiency at specific layers. But over time, as infrastructure costs decrease, technology matures, and economic issues surface, these systems tend to decline. Crypto cards may follow a similar trajectory.

What should the truly crypto-friendly future of payments look like? Using stablecoins, Solana, Ethereum, or other blockchain assets directly for spending, without intermediaries or conversion layers. But until that day arrives, crypto cards provide practical value. The key is to recognize their nature and limitations, rather than blindly believing in the narrative.

Conclusion: Innovation Requires Honesty

The main issue facing the crypto card industry is not technical but honesty. Many projects claim to be “crypto” and “decentralized” but are actually copying traditional financial structures. From the core values of cryptocurrency—permissionless, decentralized, financial democratization—crypto cards fall short.

What is truly worth looking forward to are innovations that sincerely address crypto users’ needs rather than trying to steer the masses. EtherFi’s experiments are worth attention, and Trip.com’s trials point in the right direction. But most existing projects are simply traditional financial tools dressed in a tech veneer.

A healthy industry requires honest self-reflection: Are we innovating, or just packaging? Are we promoting the vision of a decentralized crypto world, or reinforcing the dominance of traditional finance? The answers to these questions will determine the ultimate fate of crypto cards.