How Will Crypto Credit Cards Change the Industry?

Finally Making Cryptocurrency a Currency

One of the biggest critiques of all cryptocurrencies is that you cannot spend them. This is precisely what crypto credit cards are for. It is the ability to turn virtually any cryptocurrency into spendable money. The ability to spend has been, and will continue to be a hurdle for many cryptocurrencies to get over.

Instead of cryptocurrency projects vying to become an accepted medium of exchange, they may simply have to be accepted onto a platform that facilitates cryptocurrency payments like Crypto.com. I can see projects battling over the attention of companies that offer crypto cards. If they earn their favor and are added to their platform, then suddenly the coin becomes spendable to their entire user base.

What Makes Money, Money?

For many people, the ability to spend money is what makes money, money. Without this capability, they cannot be convinced to trade their hard earned dollars for digits on a screen. Being able to turn those digits into a donut or coffee is exactly the thing that could convince the next billion people to get into cryptocurrency.

How Crypto Cards Work Under the Hood

It is worth understanding how crypto credit cards work under the hood. Most of them aren’t credit cards per se. They are VISA Debit cards, which simply means that you need to “load” them with money. Due to the technical infrastructure, and regulations behind how these cards need to operate, you are loading them with fiat money. At least, this is the case with Crypto.com.

After loading the card with fiat, you may spend money on the card at any regular VISA or Mastercard terminal. The money is subtracted from your balance, and whatever rewards you are to receive are paid out into your account. To make sure there is no confusion, this is what happened.

1. You sold cryptocurrency for fiat in order to load your card
2. Upon purchasing a coffee, fiat left your card and you received the coffee

To me, this is still spending your cryptocurrency, it’s just that you had to go through a middle currency to get there. The way I see it, as long as you can trade crypto for fiat anytime, and in an instant, you are spending that crypto.

Merchants Start Accepting Cryptocurrency

Creating more ways to spend cryptocurrency is one of the areas that the crypto economy has failed to innovate for the most part. Not necessarily because the people who have cryptocurrency don’t want to spend it, but because the people they want to give it to (vendors) don’t want to accept it.  More businesses and merchants are becoming more open to receiving cryptocurrency as a form of payment, however. One reason is because of how easy it has become, and the other reason is that it can be a marketing and recognition play. A company who starts accepting cryptocurrency is seen as avant-garde, cutting edge, or progressive.

For the average retail business though, setting up the ability to accept cryptocurrency can be a technical and cumbersome process. With crypto cards in the hands of customers, the process of receiving money is all the same to the merchant. This entirely solves the problem of not being able to convince merchants to accept cryptocurrency.

Introducing Smart Cards

In the future, I imagine we will have “smart cards”. That is, the ability for the customer to choose what currency to spend, and the merchant to choose what currency to receive.

It is perceivable that the merchant will then be able to decide that they want to receive 20% bitcoin, and 80% stablecoin. This newfound ability to choose what to receive may become a primary way for businesses, and the people behind the businesses to onboard into cryptocurrency.

Crypto Rewards Everywhere

Be prepared to see cryptocurrency companies offering credit cards come out with some pretty amazing rewards. The payments space is already an incredibly competitive industry. Now that there is an entirely new way to spend, there is a new set of players in town. That is, Binance, Crypto.com, BlockFi, and ShakePay. Basically any company that offers a crypto-based credit card. These companies will be offering amazing incentives and rewards for spending your cryptocurrency as well. BlockFi has offered 1.5% cashback paid in BTC, while Crypto.com is offering up to 8% paid in CRO.

Each company must create incentives for their customers to spend through them. The trick is to offer these incentives and still make a profit. This is why it matters what else those companies are offering to their customers.

With respect to Binance, you can get any financial product you want on their site. On ShakePay’s side of this, they offer far less in terms of variety. Crypto.com stakes their unique claim in the industry by offering a range of rewards, depending on which tier of card you have attained. The gamification factor of what Crypto.com is offering has really worked out for them, as they currently hold a dominant position in the crypto card space. It will be interesting to see this dynamic of incentive/reward structures play out on the stage of the retail marketplace.

Only Good Things to Come from Crypto Cards

I can only see good things as more companies create more ways to spend cryptocurrency using crypto cards. It allows more people to be introduced to crypto. It creates more economic opportunity by allowing those who hold value to transact with one another, where they previously could not. It pushes the innovation of cryptocurrency as money, that is, it allows more people to use cryptocurrency as a medium of exchange. This ultimately strengthens the value proposition and adds another dimension of legitimacy.