What are Crypto Debit Cards and How Could They Help with Mass Adoption?

The biggest problem for crypto is convencience.

For many new users, learning crypto can seem understandably daunting.

One such solution would be to have crypto on a debit card, allowing users to easily transact with merchants.

In this article, we are going to review crypto debit cards and study some of their pros and cons.

Most importantly, we are going to review their key drawback, i.e. centralization, and offer some ways to resolve this problem.

What is a Crypto Debit Card?

A crypto debit card is a type of payment card that allows users to spend their cryptocurrencies, such as Bitcoin, Ethereum, or other digital assets, for everyday transactions. It bridges the gap between traditional fiat currencies (like the US dollar or Euro) and cryptocurrencies, enabling individuals to use their crypto holdings in the same way they would use a regular debit card linked to a bank account.

In a nutshell, a crypto debit card works pretty similarly to a traditional bank card. What makes it different is the possibility to store crypto along with traditional fiat currencies. Such cards enable their owners to spend cryptocurrencies with ease while making daily purchases.

Cryptocurrency adopters praise digital assets for fast borderless transactions, low fees, and universal acceptance. Yet, even with all the wallets and exchanges that are now available in the market, they are still hardly suitable for daily shopping. 

One has to perform many extra actions to start using crypto, from getting a verified account on an exchange to finding a shop that officially accepts digital coins.

Crypto cards remove this gap. Linked to a crypto wallet, such a card automatically converts crypto into fiat and sends funds to the merchant’s bank account. What’s more, some cards even enable cash withdrawals in ATMs.

The History Of Crypto Debit Cards

Here’s a brief overview of some key milestones that crypto cards have passed through over time.

2013: Xapo and E-Coin became the first companies to launch crypto debit cards supported by VISA and MasterCard. This early move was doomed to fail, though, mostly due to regulatory issues. High transaction fees and limited acceptance weren’t helpful at this stage either.

2015: Shift Payments partnered with Coinbase to issue Bitcoin debit cards. Users could link these cards to their wallets on this exchange and seamlessly spend bitcoins in local shops.

2016-2017: As Bitcoin was gaining popularity, more providers were joining the race. TenX, Centra, MonaCo, Crypterium, and many other companies launched their versions of Bitcoin cards in that period of time.

2018: Since the crypto market was still lacking proper regulations, some fraudulent players managed to increase their profits while avoiding proper customer verification procedures. 

Thus, WaveCrest, one of the key crypto card issuers at that time was banned by VISA for numerous violations of the KYC (know-your-customer) procedure.

2021: Despite the long-lasting crypto winter that began in 2018, VISA didn’t turn away from crypto. It was obvious that the adoption of new technologies was only going to grow. In 2021, the global card issuer partnered with 50 leading crypto platforms boosting the total sum of money spent up to a $1 billion threshold.

2022-2023: Although the number of crypto card providers has significantly grown, this market still remains in its early stages. The lack of a clear regulatory framework across different regions also remains a major obstacle. Yet, the ever-growing acceptance and adoption of digital assets make the future look much brighter. Crypto debit and credit cards are surely here to stay.

How To Select A Crypto Debit Card?

At the time of writing, there are a few dozen of options one may select from. With such a large variety, how to pick up the best crypto debit card for daily usage?

Here are the key aspects to consider:

• Geographical coverage: check if the given card provider operates in your region. It’s the first and the most important aspect to find out.
• Issuing company: study the card provider’s reputation by reading reviews on third-party platforms. Pay specific attention to how it is regulated and if it has ever faced any fines.
• Security: in addition, check what options the card offers for protecting your crypto, if it has 2FA, and if it encrypts your funds. Also, find out if there have been any incidents with customers’ personal data leakage.
• Supported coins: check if the card supports any other coins apart from the most popular options like Bitcoin or Ethereum. Even if you don’t consider investing in anything else now, you may change your mind later.
• Fees: compare deposit and withdrawal fees with other crypto debit cards and select the lowest option. Find out if there are any additional transaction fees, yearly or monthly fees for maintenance, etc.
• Acceptance: think ahead of how and where you are going to use this card. Find out if your favorite merchants accept such a payment option at all.
• Conversion rates: look out for the cards with the best exchange rate for switching crypto into fiat and vice versa. Don’t forget about the fees, though, as cards with better rates may charge higher commissions.
• Wallet compatibility: check if the card is compatible with the crypto wallet of your choice. Equally important, check if the process of linking these two is secure and simple enough.
• Customer support: study end-users’ reviews on third-party platforms such as TrustPilot or NerdWallet. It’s also useful to check frequently asked questions to see if this section provides sufficient information on the most acute topics.
• Rewards: last but not least, see what cashback rewards the card offers. Such reward programs may be really useful, especially for large purchases

Crypto Debit Cards: Pros and Cons

Crypto debit cards offer a number of benefits to those who use them, but still, they are not ideal. Consider the following positive and negative aspects if you plan to rely on this payment solution.

Advantages

• Ease of use: such cards allow spending your crypto in a way similar to traditional VISA debit cards which makes them just as convenient. Thus, they represent a tool that finally makes crypto suitable for daily purchases.
• Effortlessly exchange crypto for cash: verified users can easily convert crypto into fiat and vice versa. Besides, crypto cards make it possible to withdraw cash from ATMs which contributes to funds’ accessibility.
• Security: typically, crypto cards come with enhanced security features such as 2FA and encryption. This makes them a highly secure option for storing your funds.
• Cashback and other perks: some crypto rewards programs offer their users much higher returns than the traditional banking sector. At the same time, spending limits of such cards are higher.
• No credit check: to get a crypto debit card, one does not have to pass any credit check. Thus, people with poor or zero credit history can still enjoy using convenient financial products.
• No bank account: users don’t have to link their crypto cards to bank accounts which may be a good option for remote and unbanked regions.
• Reduced costs: with crypto cards, users can exchange value in a much more cost-efficient way, especially in comparison with traditional wire transfers.
• Flexibility: Bitcoin is often not the only option to store crypto on a card. Many providers add a variety of other coins giving the flexibility to use other assets as well.

Disadvantages

• Geographical limitations: you can hardly find a provider that delivers crypto cards all around the globe.
• Regulatory risks: some of the crypto cards may face regional restrictions due to local regulatory frameworks. Thus, using crypto cards may simply be illegal in some regions.
• Deposit and withdrawal limits. Some cards impose limits on withdrawing and depositing funds just like regular bank cards.
• Taxes for US citizens: in this region, cryptocurrencies are subject to taxation, just like any other means of making a profit. 
• Data privacy risks: not all crypto card providers may have enough reserves to ensure the security of their customers’ personal data. Pay specific attention to whether or not a given provider is subject to external audits and if it has passed them successfully.
• Limited support: not all card providers offer 24/7 support to their customers which may become really inconvenient in case any problems emerge.
• Dependence on the card issuer: your card may simply stop working if the issuing company blocks your region or loses its license as happened with Wavecrest in 2018.

As you may see, most of these disadvantages are inherent to traditional bank cards, too. Crypto cards may have limited functionality, impose high fees on different operations, and have limited acceptance across different merchants.

However, not every crypto card provider combines them all. Hence, detailed research can help you reduce most of these risks to a minimum.

Centralization As The Key Problem Of Crypto Debit Cards

Crypto debit cards have many different drawbacks. But still, most of them are nothing but a small inconvenience.

Yet, there is one more important negative aspect that may have serious consequences and disparage all the potential benefits. It’s centralization.

The majority of crypto debit card providers existing up to date offer their users custodial means for storing funds. Users don’t control their private keys. Thus, they don’t control their own funds either and they may lose them at any moment due to a central party failure.

Thus, such cards eliminate the key benefit of cryptocurrencies. In fact, they represent the same bank accounts with the possibility to store crypto as the only difference. Is there a way to resolve this issue and maintain all the conveniences at the same time?

A Plethora Of Decentralized Solutions 

Blockchain has significantly evolved in recent years. The available technologies now make it possible to move away from physical cards to decentralized means of payment without giving up convenience.

Here are just a few examples of DeFi solutions that can help mitigate the centralization problem inherent to crypto cards:

• Decentralized exchanges (DEXes) enable their users to switch crypto directly between one another. They eliminate the risk of a centralized party failing and thus significantly increase funds’ security.
• Decentralized lending platforms such as Liquid Loans make it possible to lend and borrow crypto on a peer-to-peer basis in a similar way.
• Decentralized stablecoins, like USDL, are fully-backed by and redeemable for the native token of a decentralized blockchain. They are issued/created by an immutable and admin key free smart contract.
• Decentralized wallets provide their users with full control over their own seed phrases and in turn their own digital assets.

With all these technologies, one may be sure that decentralized crypto cards are soon to emerge as well. This is a relatively new concept that implies issuing cards running on the blockchain. With such cards, users would be able to fully control their own funds without having to rely on any central party.

The Liquid Loans protocol will solve the centralized stablecoin issue, but it won't solve the crypto debit card issues.

Maybe one day in the future, somebody will build infrastructure to facilitate easy transaction with USDL to merchants.