Editor's Note: Crypto cards were once seen as a bridge connecting the traditional payment system with the crypto world, but as the industry develops, the limitations of this model have become increasingly apparent: centralization, reliance on compliance, lack of privacy, additional fees, and even a departure from the core spirit of cryptocurrency.

This article provides an in-depth analysis of the nature of crypto cards, pointing out that they are merely transitional solutions, not true innovations in decentralized payments. At the same time, the article presents EtherFi as one of the few models that aligns with crypto values, demonstrating the potential for DeFi and TradFi integration.

Below is the original text:

My overall view is that crypto cards are only a temporary solution to address two problems we all know well: first, bringing cryptocurrency to the masses; second, ensuring that cryptocurrency can be accepted as a payment method globally.

Crypto cards are still cards after all. If someone truly identifies with the core values of cryptocurrency but believes that the future will be dominated by cards, then you might need to rethink your vision.

All Crypto Card Companies Will Eventually Fail

In the long run, crypto cards will likely die out, but traditional cards will not. Crypto cards just add a layer of abstraction; they are not pure cryptocurrency use cases. The card issuer is still a bank. Yes, they may have different logos, different designs, different user experiences, but as I said before, this is just abstraction. Abstraction makes things more convenient for users, but the underlying process hasn't changed.

Different public chains and Rollups have been obsessed with comparing their TPS and infrastructure to Visa and Mastercard. This goal has existed for years: either "replace" or, more aggressively, "disrupt" Visa, Mastercard, AmEx, and other payment processors.

But this goal cannot be achieved through crypto cards—they are not replacements; instead, they bring more value to Visa and Mastercard.

These institutions are still the critical "gatekeepers." They have the power to set rules, define compliance standards, and even ban your card, company, or even bank if necessary.

Why would an industry that has always pursued "permissionless" and "decentralized" ideals now hand everything over to payment processors?

Your card is Visa, not Ethereum. Your card is a traditional bank, not MetaMask. You are spending fiat, not cryptocurrency.

Your favorite crypto card companies have done almost nothing except put their logo on the card. They are just riding the narrative and will disappear in a few years, and those digital cards issued until 2030 won't actually function by then.

I'll explain later how easy it is to make a crypto card now—in the future, you might even make one yourself!

The Same Problems + More Fees

The best analogy I can think of is "Application-Specific Sequencing." Yes, it's cool that applications can process transactions themselves and profit from it, but it's only temporary: infrastructure costs are falling, communication is maturing, and the economic issues exist at a higher level, not a lower one. (If you're interested, check out @mvyletel_jr's great talk on ASS.)

The same goes for crypto cards. Yes, you can top up with cryptocurrency, and the card will convert it to fiat for payment, but the problems of centralization and permissioned access remain.

It does help in the short term: merchants don't need to adopt new payment methods, and crypto spending is almost "invisible."

But this is just a transitional step toward what most crypto believers truly want:
Demand: Pay directly with stablecoins, Solana, Ethereum, Zcash
No need: The indirect path of USDT → Crypto Card → Bank → Fiat

Adding a layer of abstraction adds a layer of fees: spread fees, withdrawal fees, transfer fees, and sometimes even custody earnings. These fees may seem insignificant, but they compound: a penny saved is a penny earned.

Using a Crypto Card Doesn't Mean You Are "Unbanked" or "Debanked"

Another misconception I've observed is that people think using a crypto card means they are unbanked or debanked. Of course, this isn't true. Under the label of a crypto card, there is still a bank, and the bank must report some of your information to the local government. Not all data, but at least some key data.

If you are an EU citizen or resident, the government will know your bank account earnings, large suspicious transactions, certain investment income, account balances, etc. If the underlying bank is in the US, they know even more.

From a crypto perspective, this has both pros and cons. The pro is transparency and verifiability, but the same rules apply when you use a standard debit or credit card from your local bank. The con is that it is not anonymous or pseudonymous: the bank still sees your name, not an EVM or SVM address, and you still need to do KYC.

Limitations Still Exist

You might say that crypto cards are great because they are really easy to set up: download the app, complete KYC, wait 1–2 minutes for verification, top up with cryptocurrency, and then you're ready to use it. Yes, this is indeed a killer feature, extremely convenient, but not everyone can use it.

Russia, Ukraine, Syria, Iraq, Iran, Myanmar, Lebanon, Afghanistan, and half of Africa—citizens of these countries cannot use cryptocurrency for daily spending without residency in another country.

But hey, it's only 10–20 countries that don't qualify, what about the other 150+ countries? The issue is not whether the majority can use it, but the core value of crypto: a decentralized network with equal nodes, financial equality, and equal rights for all. This does not exist in crypto cards because they are not "crypto" at all.

Max Karpis perfectly explains here why "neo-banks" are doomed to fail from the start.

For reference, a real scenario where I used cryptocurrency for payment was when booking a flight on Trip.com. They recently added an option to pay with stablecoins, directly from your wallet, and of course, it's available to anyone in the world.

This is the real cryptocurrency use case and a true crypto payment. I believe the final form will be like this: wallets will be specifically optimized for the user experience of payments and spending, or (less likely) wallets will evolve into crypto cards, if crypto payments are somehow widely adopted.

Crypto Cards Function Similarly to Liquidity Bridges (Rain)

I have an interesting observation: self-custody crypto cards operate very similarly to cross-chain bridges.

This only applies to self-custody cards: cards issued by centralized exchanges (CEX) are not self-custody, so exchanges like Coinbase have no obligation to make users think the funds are under their control.

A legitimate use case for CEX cards is that they can serve as proof of funds for government, visa applications, or similar scenarios. When you use a crypto card tied to your CEX balance, you are still within the same ecosystem.

Self-custody crypto cards are different: they operate like liquidity bridges, where you lock funds (cryptocurrency) on chain A (crypto balance), and then unlock funds (fiat) on chain B (the real world).

This "bridge" in the crypto card space is like the shovel during the California Gold Rush: it is the key secure channel connecting crypto-native users and businesses that want to issue their own cards.

@stablewatchHQ's analysis of this bridge is spot-on, considering it essentially a Card-as-a-Service (CaaS) model. This is the most overlooked aspect by everyone discussing crypto cards. These CaaS platforms provide the infrastructure for businesses to launch their own branded cards.

Rain: How Crypto Cards Are Born

About half of your favorite crypto cards are probably powered by @raincards, and you may never have heard of it. Rain is one of the most fundamental protocols in the neo-banking system because it handles almost all the core components behind crypto cards. All that's left for the remaining companies to do is slap their logo on it (sounds harsh, but it's close to the truth).

Rain enables companies to quickly launch their own crypto cards, and frankly, Rain's execution capabilities could even allow it to exist long-term outside the crypto space. So, stop fantasizing that teams need to raise tens of millions of dollars to issue a crypto card—they don't need that capital; they just need Rain.

The reason I emphasize Rain so much is that people generally overestimate the effort required to issue a crypto card. Maybe I'll write a separate article about Rain in the future because it is truly a severely underestimated technology.

Crypto Cards Have No Privacy or Anonymity

The lack of privacy or anonymity in crypto cards is not a problem with the cards themselves, but rather an issue deliberately ignored by those promoting them, hiding behind so-called "crypto values."

Privacy is not a widely used feature in the crypto space; pseudoprivacy (pseudonymity) does exist because we see addresses, not names. However, if you are ZachXBT, Wintermute's Igor Igamberdiev, Paradigm's Storm, or someone else with strong on-chain analysis capabilities, you can significantly narrow down the real identity corresponding to an address.

Of course, crypto cards don't even have the pseudonymity of traditional cryptocurrencies because you must complete KYC to activate a crypto card (actually, you're not activating a crypto card; you're opening a bank account).

If you are in the EU, the company providing the crypto card will still send some of your data to the government for tax purposes or other reasons the government needs to know. Now, you've given regulators a new opportunity to track you: linking your crypto address to your real identity.

Personal Data: The Currency of the Future

Cash still exists (the only form of anonymity, except the seller seeing you) and will exist for a long time. But eventually, everything will be digitized. The current digital system does not offer any benefits to consumers in terms of privacy: the more you spend, the higher the fees you pay, and in exchange, they know more about you. What a "great deal"!

Privacy is a luxury, and in the crypto card space, it will remain so. An interesting idea is that if we achieve truly good privacy, even to the point where businesses and institutions are willing to pay for it (not like Facebook, but with our consent), it could become the currency of the future, or even the only currency in a jobless, AI-driven world.

If Everything Is Doomed to Fail, Why Are Tempo, Arc Plasma, Stable Still Being Built?

The answer is simple—to lock users into the ecosystem.

Most non-custodial cards choose L2s (e.g., MetaMask uses @LineaBuild) or independent L1s (e.g., Plasma Card uses @Plasma). Due to high costs and finality issues, Ethereum or Bitcoin are generally not suitable for such operations. Some cards use Solana, but this is still a minority.

Of course, companies choose different blockchains not only for infrastructure but also for economic benefits.

MetaMask uses Linea not because Linea is the fastest or most secure, but because both Linea and MetaMask belong to the ConsenSys ecosystem.

I specifically use MetaMask as an example because it uses Linea. Everyone knows that almost no one uses Linea; it is far behind Base or Arbitrum in the L2 competition.

But ConsenSys made a smart decision to put Linea underneath their card because it locks users into the ecosystem. Users get accustomed to a good user experience through something they use daily. Linea naturally attracts liquidity, trading volume, and other metrics, rather than relying on liquidity mining campaigns or begging users to bridge.

This strategy is similar to what Apple did when it launched the iPhone in 2007, keeping users on iOS until they become so habituated they can't switch to another ecosystem. Never underestimate the power of habit.

EtherFi Is the Only Viable Crypto Card

After all this thinking, I've concluded that: @ether_fi is probably the only crypto card that truly aligns with the crypto spirit (this research is not sponsored by EtherFi, and even if it were, I wouldn't mind).

In most crypto cards, the cryptocurrency you top up is sold, and then your balance is replenished with cash (similar to the liquidity bridge I described earlier).

EtherFi is different: the system never sells your cryptocurrency; instead, it gives you a cash loan and uses your crypto assets to earn yield.

EtherFi's model is similar to Aave. Most DeFi users dream of seamlessly taking out cash loans collateralized by their crypto assets, and this capability has emerged. You might ask: "Isn't this the same? I can top up with crypto and spend with a crypto card like a normal debit card; is this extra step necessary?"

The problem is that selling your cryptocurrency is a taxable event, sometimes even more taxable than daily spending. And in most cards, every operation you do might be taxed, leading to you paying more taxes (again, using a crypto card does not mean being debanked).

EtherFi solves this problem to some extent because you are not actually selling cryptocurrency; you are just using it as collateral for a loan.

For this reason alone (plus no foreign exchange fees on USD, cashback, and other benefits), EtherFi becomes the best example of the convergence of DeFi and TradFi.

Most cards try to pretend they are crypto products but are actually just liquidity bridges, while EtherFi is truly for crypto users, not just for bringing cryptocurrency to the masses: it allows crypto users to spend locally until the masses realize how cool this model is. Among all crypto cards, EtherFi might be the only one that can survive long-term.

I think crypto cards are an experimental field, but unfortunately, most teams you see are just riding the narrative without giving due recognition to the underlying systems and developers.

Let's see where progress and innovation take us. Currently, we are seeing the globalization of crypto cards (horizontal growth), but there is a lack of vertical growth, which is precisely what this payment technology needs in its early stages.