A quick tap of your phone can acquire that latte you're eyeing in a matter of seconds. For those more "old-fashioned," a quick swipe of the credit card can do the same. Our increasingly digital world has made it commonplace to not carry physical cash, let alone an actual wallet.
But as a cryptocurrency holder or potential investor, you may have concerns that you'd be sacrificing simplicity or convenience. While that may have been true in the earliest days of crypto, vendors and merchants have made it easier to incorporate cryptocurrency into your regular shopping routine. After all, they have a big incentive to do so.
Crypto is becoming more mainstream and ubiquitous in society, and we'll start to see more and more shops accept cryptocurrency in a variety of forms. In the meantime, there's an easy solution that allows you to use your crypto right now: a crypto debit card. This is a relatively new phenomenon, as in the United States alone there was a waitlist to get one as recently as last year.
As a quick refresher, cryptocurrencies are "digital assets and decentralized systems that allow for secure online payments," per Investopedia. One of the biggest appeals is that the currency rises and falls according to supply and demand, not a country's fiscal policy or inherent currency value. Additionally, many are projecting cryptocurrencies to be "the future" of buying and selling.
What is a Crypto Debit Card?
As the name suggests, a crypto debit card can be used just like a regular credit or debit card, and is accepted in any place that accepts cards. That's because most crypto debit cards are issued by credit card networks like Visa or Mastercard that facilitate the transaction and ensure the merchant is paid in traditional fiat currency.
How does a crypto debit card work?
Most are preloaded, meaning that it has to be "filled up" ahead of time with the amount of desired cryptocurrency funds. This can be done via a cryptocurrency wallet, which adds a layer of safety to your crypto holdings. As frequent users of crypto know, there is a unique key (or password) used to access your account. Think of it as a helpful organizational tool for your various assets (just like a regular wallet!)
It's important to find the right company to supply your card, just as you would with a regular debit or credit card. Here are some of the top crypto debit cards on the market right now:
Crypto.com VISA Debit Card: With over 10 million users worldwide, this Hong-Kong based outlet is a staple in 90 countries worldwide. They tout an 8% cashback VISA crypto debit card and have even recruited Hollywood star Matt Damon to pitch their products. You may have even caught their Super Bowl ad, in which LeBron James is teleported back to his high school bedroom to give advice to his younger self. Crypto.com is arguably the most popular crypto debit card servicer out there.
Coinbase Card: Speaking of the Super Bowl, you may have caught that bouncing QR-code commercial during it. That was brought to you via Coinbase, a growing cryptocurrency exchange platform. They also offer their own crypto debit card, the Coinbase Card, which offers cashback rewards of 4% and robust security.
BlockCard: This is another prepaid crypto debit card provided by VISA. There's a $5 fee for use each month if you spend less than $750. Otherwise, it has no deposit and exchange fees. It also supports thirteen different currencies, including the popular staples Bitcoin and Ethereum.
Each of these outlets has their own line of crypto debit cards, and while we won't offer recommendations one way or another (that's ultimately up to you), it is true that each has unique perks, such as cashback, enhanced security, and low fees. Like most credit cards, you have to apply for a crypto debit card
Consider which card is the most accessible, practical, and backed by a reputable company. For instance, not every crypto debit card universally accepts every cryptocurrency out there. Many only accept the more popular ones, such as Bitcoin (BTC) and Ethereum (ETH), and some only accept certain fiat (traditional, government-issued) currencies for exchanges. Here's a helpful resource for determining which card might be the right fit.
Practically speaking, crypto debit cards have progressed to the point where you can use most at ATMs to withdraw money. Some aren't even physical cards in the first place, making them easy options to add to your digital wallet, such as Apple Pay or Google Pay.
It's clear that this isn't just a niche movement, as "more than $1 billion worth of cryptocurrency was spent by consumers globally on goods and services through their crypto-linked cards in the first six months of 2021," according to a recent CNBC report.
How do you use it?
Let's use the previously mentioned Crypto.com platform as an example. Needless to say, you need to be a holder of cryptocurrency in the first place. If you already are, you can skip this next part. If not, buying cryptocurrency has become much easier than the early "mining" days. When Bitcoin (BTC), for instance, was first introduced, prospectors needed complex computer setups running constantly to search for a single bitcoin.
Due to the growing ubiquity of BTC, there are now cryptocurrency exchanges where you can purchase it, and other cryptocurrencies, directly. Even popular stock-trading platforms like WeBull and Robinhood have methods of purchasing crypto. Those already stocked up with a specific cryptocurrency can trade one for the other (e.g. buying Bitcoin with Ethereum).
Once you're a holder of crypto, you can apply for one of the many cards out there – in this case, Crypto.com's VISA card. Next, you'd download the Crypto.com app or use their website to do a process called topping up. Remember that as a pre-loaded card, you'll have a fixed supply of funds that you can put on at a time.
Most platforms, such as this one, have a "top up" button, making it easy and accessible to preload your funds.
You have the option to load up your card with regular currency by using the fiat wallet option, but if you're trying to load it with cryptocurrency, you'll have to link it with your crypto holdings. Just like linking a regular credit card to a traditional financial institution account, you can link your crypto debit card to your crypto wallet, which conveniently holds the unique passkeys needed to access your crypto holdings.
As a third option, you can also top up your crypto debit card with another debit or credit card. Sounds counterintuitive, but some might choose to do this if they prefer the rewards or perks they get with their crypto debit card.
Pros and Cons of Crypto Debit Cards
"Why wouldn't I just use my regular debit or credit card?," you may ask. While everyone has different reasons for why they use a credit or debit card (some have cash back perks, accrue airline miles, etc.), there are some unique advantages that crypto debit cards offer.
However, we'll also look at some potential downsides to give a thorough, transparent overview of any limitations when it comes to crypto credit cards.
- No Exchange Fees: Because cryptocurrency is decentralized, meaning it's not regulated by a central banking authority, you can use it anywhere in the world without being subject to foreign exchange fees. Visitors of Canada from the United States, for instance, face fees to convert U.S. dollars into Canadian Dollars. The value of your crypto doesn't increase or lessen depending on where you are, as the currency itself isn't tied to a particular country's fiat currency system.
- Easy to Spend Crypto: Using a crypto debit card makes spending cryptocurrency easy. For instance, if someone is paid bonuses in cryptocurrency or makes a significant portion of their income in various cryptocurrencies, they can quickly and efficiently spend said funds without hassle.
- Rising Integration: As we'll get to in a second, many businesses have been slow to accept cryptocurrencies like Bitcoin, Ethereum, or Litecoin. However, there's reason for optimism. California currently has over 440 businesses (and climbing) that accept bitcoin, and in the U.S. alone, 2,300 businesses accept it.
- More Bang For Your Buck (Potentially): Let's say you're a holder of Bitcoin (BTC), which is currently valued at $41,000 USD. And let's also say you're gearing up for a big purchase, such as a car. Your traditional accounts might not earn that much interest, but BTC could rise to $44,000 in a matter of days. By choosing to buy at the right time, your dollar may be able to go a little farther. However the opposite can happen too (BTC's value dips), as we'll look at in the next section.
- Limitations: As mentioned before, your crypto debit card may have limitations like being restricted to only certain cryptocurrencies or not working with traditional fiat currencies. Moreover, this is still a relatively new product / avenue so not every business or country is going to be infrastructurally prepared to accept crypto debit cards. For reference, 15,714 businesses worldwide accepted Bitcoin, as of 2021. That figure is growing, but it's still not as universally accepted as consumers would like.
- Tax Implications: Unfortunately, crypto transactions are subject to capital gains tax. As NerdWallet writer Ruth Sarreal put it, "When you pay with your crypto debit card, that's a taxable event: When you use your card, you're selling some cryptocurrency and exchanging it for dollars, and you might be selling at a higher or lower price than you bought the digital currency for, meaning that you've created a capital gain or loss."
- Volatility: Cryptocurrencies are still subject to high volatility these days, meaning your spending power will fluctuate. An example of this is Bitcoin fluctuating from ~38,000 to ~44,000 in just a week. If this kind of volatility makes you uncomfortable, a crypto debit card may not be the best option.
In other words, the aforementioned perk of being able to get a "bargain" for certain purchases could turn into a loss if the cryptocurrency you use drops in value. Here's a hypothetical scenario. You load your card with 0.12 in BTC, which is currently $5,000. However, BTC has a bad week or month, and suddenly the value on that card is much less.
Crypto Debit Cards vs. Crypto Rewards Credit Cards
A crypto debit card is not the same thing as a crypto rewards credit card. As mentioned before, a crypto debit card is typically a preloaded card that operates like a regular debit card: you can use the money that's on there and it automatically deducts when you make a purchase.
However, a crypto rewards credit card is just a regular credit card that uses fiat money. The only difference is that you can earn cryptocurrency for making purchases, just as you would with an airline mileage rewards card or traditional cash back card.
For example, many airline-based credit cards will offer you "30,000 bonus miles" for spending $3,000 in the first few months of having the card. Similarly, there are crypto credit cards that will give you hundreds of dollars in Bitcoin if you reach the purchase threshold.
You may even have a crypto rewards card without even realizing it. Venmo and Cash App, the popular money-sharing platforms, have introduced their own forms of crypto rewards. Cash App card users, for instance, can choose to receive crypto as part of their "boosts" reward system.
If you're considering a crypto rewards credit card, great. Just be sure to distinguish it from a crypto debit card.
Future of Crypto Debit Cards
Will we see a day when all transactions are done via cryptocurrency because it's the only currency that's even used? Maybe. But until that day, what is the viability of a crypto credit card over the next few years?
If the current rate of progress is any indicator, then the use of crypto debit cards will meteorically rise. Coinbase launched the first crypto debit card in 2015, and just seven years later there are hundreds of options and partnerships with major financial corporations like VISA.
Given what's transpired globally over the recent weeks, people around the world are looking for alternative safety nets when it comes to their finances. The Russian rouble (which has lost 20% of its value in just a month) is an example of how traditional, fiat currency can quickly falter under certain circumstances. Perhaps those currencies won't be considered "traditional" in the coming future.
An indicator that crypto debit cards really are here to stay is the surge of major industry players and companies seeking to kick down the door of the crypto card market. VISA certainly seized on the opportunity to become a facilitator of these transactions, but other popular financial institutions like PayPal, Venmo, Cash App, and Tesla are investing into crypto as well.
The only major hangup some experts foresee is increasing regulation of cryptocurrency by countries and their governments – or even outright bans. China completely banned cryptocurrency trading and mining last year, and eight other countries followed suit.
We can't predict the future or control how governments will regulate cryptocurrency. However, it's undeniable that cryptocurrency has a strong social sentiment and is growing ever-more popular in mainstream use. Crypto debit cards are a first step in demystifying cryptocurrency and integrating it into our daily lives.