Written by: Pzai, Foresight News
With the booming development of the cryptocurrency asset market, we are facing an era of 'big payment cards', where it seems that every protocol is eager to have its own cryptocurrency card business, aiming to maximize each user retention within the protocol. Behind the dazzling choices are countless payment merchants building bridges between cryptocurrency and traditional payment methods. Moreover, in terms of asset types and yield choices, the unique on-chain asset environment also provides ample support for the growth of payment cards. Why are there so many payment cards in this cycle? This article will analyze from multiple perspectives.
Analysis of the operational model
Cryptocurrency payment cards are essentially bridges connecting the cryptocurrency ecosystem with traditional payment networks. The entire system involves multiple participants, including users, issuers, custody service providers, payment channels, merchants, and card organizations. Users first apply for a cryptocurrency payment card from the issuer, which connects with card organizations like Visa and Mastercard through issuing intermediaries to complete card issuance. At the same time, custody service providers manage users' cryptocurrency assets and may invest part of the funds elsewhere to generate income, forming a complete capital management closed loop.
When users consume using cryptocurrency payment cards, the system automatically performs real-time conversion from cryptocurrency to fiat currency. The specific process is as follows: the user swipes the card at the merchant, the payment request is processed through the payment channel, and the system deducts an equivalent amount of cryptocurrency from the user’s custody account and converts it into fiat currency, ultimately completing the payment to the merchant. The entire process is no different from traditional bank card payments for merchants, while users achieve the goal of directly using digital assets for daily consumption.
The current cryptocurrency payment card products have been widely integrated with mainstream payment methods, including Google Pay, Apple Pay, and Alipay, greatly enhancing usability. Major products on the market include Crypto.com Visa Card, Binance Card, Bybit Card, and Bitget Card, which are typically launched by large cryptocurrency exchanges. On the technical front, some issuers have also integrated DeFi protocols such as Ethena, Morpho, and USUAL to provide users with asset appreciation services, creating a complete financial service ecosystem from payment to wealth management.
Source: X: Yue Xiaoyu
Growth engines: Booming demand side
According to a report by The Brainy Insights, the global cryptocurrency credit card market was 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 essentially represents a growth battle. Although the profit margin of payment cards themselves is relatively limited for protocols, the payment card business possesses extremely high strategic value in user acquisition, ecological construction, 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, and even further ecological expansion.
In the cryptocurrency realm, the underlying demand for payment has spawned many PayFi products, but 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% focus on low fees), and financial autonomy (32% pursue decentralization), the actual application scale still significantly lags behind traditional payment systems. The current traditional payment market is valued at several trillion dollars, covering the vast majority of daily transactions globally, while cryptocurrency payments occupy only a tiny share, mainly concentrated in niche scenarios like cross-border remittances and digital asset trading.
The core reasons why users prefer traditional payment methods can be summarized as follows:
Trust and security: Cryptocurrency users are concerned about the security risks of cryptocurrency payments (such as hacking attacks 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 cryptocurrency payments difficult to serve as a stable medium of exchange, while the stability of traditional fiat currencies is more suitable for daily consumption. In addition, users believe that insufficient merchant acceptance limits the practicality of cryptocurrency payments, whereas traditional payments achieve seamless coverage through widespread POS terminals and online integration.
User experience inertia: The operational threshold of traditional payment tools is low, and users have formed long-term usage habits, while the complexity and technical threshold of cryptocurrency wallets pose barriers to widespread adoption.
As such, the payment card serves as a bridge connecting cryptocurrency assets with the traditional payment ecosystem, where its core utility lies in the ability to instantly convert cryptocurrency assets into fiat currency for transactions via existing merchant settlement networks, thus extending the utility of on-chain assets + real-world payment scenarios while reducing cross-border channel costs and price volatility risks.
Regulatory 'arbitrage': Avoiding off-chain risks and reducing costs
Geographically, payment settlement merchants tend to concentrate more in Europe due to the need to balance the dual compliance characteristics of cryptocurrencies and fiat currencies. According to research by Adan.eu, European countries have an average cryptocurrency adoption rate of over 10%, particularly prominent among young populations and in areas where fintech is active. Consumers' preference for flexible payment methods, coupled with the expansion of the stablecoin ecosystem, makes cryptocurrency payment cards an important bridge connecting traditional finance and the Web3 world.
Additionally, due to the strong cross-regional liquidity of the US dollar and euro, and the fact that payment cards often involve stablecoin payments, using cryptocurrency payment cards in certain countries that need to avoid systemic risks in the banking system can help people achieve more flexible financial services. Furthermore, from a tax perspective, the process of converting cryptocurrency assets directly through channels to cashing out somewhat avoids tax levies in some transaction processes, which has become an opportunity for some users to utilize crypto cards.
In the context of imperfect regulation on the settlement side and on-chain, the existence of gray areas has attracted many payment merchants and led to potential money laundering and regulatory evasion. However, in terms of compliance, both the EU and the US are quickly advancing and implementing legislation related to the cryptocurrency market (for example, the EU's MiCA requires relevant business companies to apply for compliance licenses within EU member states to continue serving and to impose restrictions within the scope of services). Such models will no longer be sustainable.
Business model: Connecting on-chain and off-chain asset entry points
On the settlement side, cryptocurrency payment cards exhibit diversified operational forms, among which the stablecoin - consumption limit credit card / prepaid card model is the most common. The debit card model, due to its involvement in more complex fund management and risk control mechanisms, has only a few payment cards that can achieve this. When users generate demand for use, they need to first recharge stablecoins into their accounts. Once the consumption limit in the card increases accordingly, users can use that limit for various purchases. In this capital circulation chain, it involves the conversion between cryptocurrency and fiat limits, and issuers earn income through exchange rate differences and fees. Typically, during the cryptocurrency - fiat conversion process, issuers can charge a fee of 0.5% - 1%, thus making the recharge fees generated during the user's recharge process an important revenue source for the payment card business.
On-chain, some payment cards adopt a model merging with DeFi protocols, bringing idle funds in users' cards into revenue-generating mechanisms. For instance, through integration with DeFi protocols like Morpho, Infini can automatically deploy users' unspent stablecoin balances into yield protocols, enabling users to earn on-chain returns during consumption. In this model, issuers can not only earn transaction revenue from traditional payment channels but also share part of the income from DeFi yields, forming a dual profit model. At the same time, users receive asset appreciation services that traditional bank cards cannot provide, while enjoying payment convenience.
From the perspective of revenue, the model of cryptocurrency payment cards mainly consists of two parts:
On-chain taxes: Interest income from reserve assets / product income
Stablecoin issuers earn interest by holding reserve assets (such as US Treasury bonds). In Q1 2025, Coinbase's stablecoin-related revenue was approximately $197 million, with annualized interest rates typically ranging from 2% to 5%. For users, prior to the advent of on-chain payment cards, there was no way to access such earnings opportunities while using payment tools. The integration of on-chain protocols has eliminated this gap and provided a new idea for cryptocurrency issuers: to innovate capital entry channels through payment cards, reducing the cost of capital introduction while transforming into an alternative 'asset management'. After reaching a certain TVL scale in the future, cryptocurrency issuers can further innovate asset types and investment paradigms, creating more value for users.
Off-chain taxes: Revenue sharing of fees between payment card operators and issuers
When users pay using USDC through the payment card network (such as Visa), Visa typically charges an interchange fee of 1.5% to 3% of the transaction amount, which is generally borne by the user, while the issuer may also charge additional fees such as a 2% foreign transaction fee or ATM withdrawal fee. In these transactions, most fees are attributed to the settlement process, and the issuer mainly bears part of the conversion process between cryptocurrency and fiat currency.
Future of payment cards: From payment tools to ecological entry points
With the rapid development of blockchain technology and cryptocurrencies, cryptocurrency payment cards have evolved from simple payment tools to important traffic gateways in the cryptocurrency ecosystem. Amid the wave of the 'on-chain liquidity battle', payment cards are not only consumption channels but also strategic frontiers for promoting the large-scale adoption of blockchain technology. Cryptocurrency payment cards enable on-chain assets to directly enter real-world consumption, shortening the path for users to enter Web3, for example:
Users in the traditional financial world need to go through complex processes to transfer funds into the cryptocurrency market, while cryptocurrency payment cards allow them to utilize cryptocurrency assets more easily, achieving rapid off-chain connectivity.
Exchanges and DeFi platforms are promoting the popularization of cryptocurrency payment cards, which, while increasing channel traffic, can organically integrate with business-side operations to innovate and extend protocol functions to create profit points. For example, payment card users may earn platform points or token rewards with each purchase, which can further be used for on-chain investments, DeFi mining, or other ecological services, thus forming a positive feedback loop between users and platforms.
New users can first use cryptocurrency payment cards for consumption and gradually enter the on-chain ecosystem. This 'consumption-driven' user guidance method is expected to become the mainstream traffic entry strategy for Web3.
Looking ahead, the competition for cryptocurrency payment cards will further shift from a single payment tool to an ecological and comprehensive financial platform. Project parties need to break the 'short-lived' curse of cryptocurrency payment cards through technological innovation, compliance construction, and user experience optimization. The future cryptocurrency payment card will not only be a consumption tool but also a comprehensive financial platform integrating payment, investment, credit assessment, and ecological incentives. Through deep integration with DeFi, NFTs, and on-chain governance and other Web3 elements, payment cards will become the core entry point for users to enter the decentralized world.
