With the booming development of the cryptocurrency asset market, we are entering an era of “big payment cards,” where it seems that every protocol is eager to have its own crypto card business, aiming to maximize user retention within the protocol. Behind the dazzling array of choices is a multitude of payment providers bridging the gap between crypto and traditional payment methods. Additionally, the unique asset environment on-chain provides ample support for the growth of payment cards in terms of asset types and yield options. Why are there so many payment cards in this cycle? This article will analyze from multiple perspectives.

Analysis of Operating Models

Cryptocurrency payment cards are essentially a bridge connecting the cryptocurrency ecosystem with traditional payment networks. The entire system involves multiple participants, including users, issuers, custodial service providers, payment channels, merchants, and card organizations. Users first apply for a cryptocurrency payment card from the issuer, which connects with card organizations such as Visa and Mastercard through issuing intermediaries to complete the card issuance. At the same time, custodial service providers are responsible for managing users’ cryptocurrency assets and may invest part of the funds to generate returns, forming a complete financial management closed loop.

When users make purchases using a crypto payment card, the system automatically performs real-time conversion from cryptocurrency to fiat. The specific process is as follows: the user swipes the card at the merchant, the payment request is processed through the payment channel, the system deducts the equivalent amount of cryptocurrency from the user’s custody account and converts it into fiat, ultimately completing the payment to the merchant. The entire process is indistinguishable from traditional bank card payments for the merchant, while the user achieves the goal of using digital assets for daily consumption.

Current crypto payment card products have been widely integrated with mainstream payment methods, including Google Pay, Apple Pay, and Alipay, greatly enhancing usability. The main products on the market include Crypto.com Visa Card, Binance Card, Bybit Card, Bitget Card, etc., which are typically launched by large cryptocurrency exchanges. On the technical side, some issuers have also integrated DeFi protocols such as Ethena, Morpho, and USUAL to provide asset appreciation services for users, building a complete financial service ecosystem from payment to wealth management.

Image source: X: Yue Xiaoyu

Growth Tool: The Booming Demand Side

According to The Brainy Insights report, the global cryptocurrency credit card market is valued at $25 billion in 2023, and it is expected that the cryptocurrency payment card market will exceed $400 billion by 2033. Major protocols are flooding into the payment card business, which is essentially a growth battle. Although the profit share of payment cards is relatively limited for the protocols, the payment card business has extremely high strategic value in terms of user acquisition, ecosystem development, and capital accumulation. Therefore, exchanges, asset management companies, and Web3 project parties are still willing to invest, as it can bring broader user and business growth, as well as further ecosystem expansion.

In the crypto space, the underlying demand based on payments has given rise to many PayFi products. However, a survey by Bitget Wallet shows that despite the unique advantages of cryptocurrency payments in terms of speed (46% of users choose this), cross-border costs (37% value low fees), and financial autonomy (32% pursue decentralization), the actual scale of its application still shows a significant gap compared to traditional payment systems. Currently, the traditional payment market is worth trillions of dollars, covering the vast majority of everyday transactions worldwide, while crypto payments occupy only a small share, mainly concentrated in niche scenarios such as cross-border remittances and digital asset trading.

The core reasons for users’ preference for traditional payment methods can be summarized in the following three points:

• Trust and Security: Cryptocurrency users are concerned about the security risks of crypto payments (such as hacking and fraud), while traditional payments rely on mature banking systems, legal protections, and dispute resolution mechanisms, significantly reducing transaction risks.
• Stability and Convenience: Price volatility makes crypto payments difficult to use as a stable medium of exchange, while the stability of traditional fiat currency is more suitable for daily consumption. In addition, users believe that insufficient merchant acceptance limits the practicality of crypto payments, whereas traditional payments achieve seamless coverage through widespread POS terminals and online integrations.
• User experience inertia: Traditional payment tools have a low operational threshold, and users have developed long-term usage habits, while the complexity and technical threshold of crypto wallets become barriers to widespread adoption.

Thus, payment cards serve as a bridge connecting encrypted assets and the traditional payment ecosystem. Their core utility lies in the potential to instantly convert encrypted assets into fiat currency through existing merchant settlement networks to complete transactions, thereby extending the utility of on-chain assets into real-world payment scenarios, while also reducing the costs of cross-border channels and the risks of price fluctuations.

Regulatory “Arbitrage”: Avoiding Off-Chain Risks and Reducing Costs

In terms of geography, payment settlement providers are more concentrated in Europe due to the need to balance the dual compliance characteristics of both cryptocurrencies and fiat currencies. According to research by Adan.eu, European countries have an average cryptocurrency adoption rate of over 10%, particularly notable among younger demographics and in areas active in fintech. Consumers’ preference for flexible payment methods, combined with the expansion of the stablecoin ecosystem, has made crypto payment cards an important bridge connecting traditional finance and the Web3 world.

Additionally, due to the strong cross-regional circulation of the US dollar and euro, and the fact that payment cards often involve stablecoin payments, using crypto payment cards in certain countries where systemic banking risks need to be avoided can help people achieve more flexible financial services. At the tax level, the process of cashing out crypto assets directly through channels with payment cards avoids some tax levies during certain transactions to a certain extent, which has also become an opportunity for some users to utilize crypto cards.

In the context of inadequate regulation on the settlement side and on-chain, the existence of gray areas has become a magnet for many payment providers, giving rise to potential money laundering and regulatory evasion. However, in terms of compliance, both Europe and the United States are rapidly advancing and implementing legislation related to the cryptocurrency market (for example, the EU’s MiCA requires relevant business entities to apply for compliance licenses within EU member states to continue operating and imposes restrictions on the scope of services), and such a model will no longer be sustainable.

Business model: Connecting on-chain and off-chain asset entry points.

On the settlement side, crypto payment cards exhibit a diversified operational form, among which stablecoin - credit cards / prepaid cards in the form of consumption limits are the most common. The debit card model involves more complex fund management and risk control mechanisms, with only a few payment cards able to achieve this. When users have a need to use the card, they need to recharge stablecoins into their account first, and once the consumption limit in the card increases accordingly, users can then use that limit for various purchases. In this chain of fund circulation, it involves the conversion between cryptocurrency and fiat currency limits. Issuing institutions earn income through exchange rate differences, transaction fees, and other methods. During the cryptocurrency - fiat currency conversion process, the issuer can generally charge a fee of 0.5% - 1%, making the recharge fees generated during user recharges an important source of income for payment card businesses.

On-chain, some payment cards integrate with DeFi protocols to bring idle funds in users’ cards into yield generation mechanisms. For example, through integration with DeFi protocols like Morpho, Infini can automatically deploy users’ unspent stablecoin balances into yield protocols, allowing users to earn on-chain yields during their spending process. In this model, issuers can not only earn transaction profit sharing from traditional payment channels but also share in part of the revenue from DeFi earnings, creating a dual profit model. Meanwhile, users enjoy the convenience of payments while obtaining asset appreciation services that traditional bank cards cannot provide.

Therefore, from the perspective of returns, the model of crypto payment cards mainly consists of two parts:

• On-chain tax: Interest income from reserve assets / Product income
  Stablecoin issuers earn interest by holding reserve assets (such as U.S. Treasury bonds). In the first quarter of 2025, Coinbase’s stablecoin-related revenue was approximately $197 million, with annualized interest rates typically ranging from 2% to 5%. For users, there was no way to access such earning opportunities when using payment tools before the emergence of on-chain payment cards, and the integration of on-chain protocols eliminated this barrier, providing a new idea for crypto issuers to innovate asset channels through payment card solutions, reducing the cost of funding while transforming into alternative “asset management.” After achieving a certain scale of TVL in the future, crypto issuers can further innovate asset types and investment paradigms, creating more added value for users.

• Off-chain tax: Revenue sharing of transaction fees between payment card operators and issuers.
  When users make payments using USDC through payment card networks (such as Visa), Visa typically charges a swap fee of 1.5% to 3% of the transaction amount, which is generally borne by the user. Additionally, the issuing bank may impose extra fees such as a 2% foreign currency transaction fee or ATM withdrawal fees. In these transactions, most of the fees are attributed to the settlement phase, while the issuing bank primarily bears part of the cryptocurrency to fiat conversion process.

The Future of Payment Cards: From Payment Tools to Ecological Entrances

With the rapid development of blockchain technology and cryptocurrencies, crypto payment cards are no longer just simple payment tools, but have gradually evolved into an important traffic entry point for the crypto ecosystem. In the wave of the “On-chain Liquidity War”, payment cards are not only a consumption channel but also a strategic stronghold for promoting the large-scale adoption of blockchain technology. Crypto payment cards allow on-chain assets to directly enter real-world consumption, shortening the user’s path to Web3, for example:

• Users in the traditional financial world need to go through complex processes to transfer funds into the crypto market, while crypto payment cards allow them to use crypto assets more easily, achieving quick off-chain connectivity.
• Exchanges and DeFi platforms are promoting the popularity of crypto payment cards. While increasing channel traffic, they can organically integrate with business operations, innovatively extending protocol functions to create profit points. For example, payment card users may receive platform points or token rewards with each purchase, which can be further used for on-chain investments, DeFi mining, or other ecosystem services, thereby forming a positive feedback loop between users and the platform.
• New users can start by using crypto payment cards for consumption, gradually entering the on-chain ecosystem. This “consumption-driven” user guidance approach is expected to become a mainstream traffic entry strategy for Web3.

Looking ahead, the competition for crypto payment cards will further shift from being a single payment tool to an ecological and integrated financial platform. Project teams need to break the “short-lived” curse of crypto payment cards through technological innovation, compliance construction, and user experience optimization. Future crypto payment cards will not only be consumption tools, but comprehensive financial platforms that integrate payment, investment, credit assessment, and ecological incentives. Through deep integration with Web3 elements such as DeFi, NFTs, and on-chain governance, payment cards will become the core gateway for users to enter the decentralized world.

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