Spending your cryptocurrency was once a headache-inducing endeavour. Not only did few merchants accept bitcoin as a medium of exchange, but without access to the now ubiquitous fiat off-ramps, you had to source a buyer willing to exchange fiat for digital. That entailed a degree of risk since peer-to-peer marketplaces that protected users with an escrow system didn't exist.
What a difference a couple of years makes. These days it's easy to use bitcoin and ether to buy goods and services online, in the metaverse, and in the meatspace, with payment gateways handling conversion at the point of sale. The spender authorizes the transaction while the processor converts their crypto into fiat in real time, de-risking the transaction for merchants sceptical of accepting volatile virtual currencies. Everyone's a winner.
Of all the infrastructure put in place since the emergence of the digital asset sector, few have done as much to accelerate mainstream adoption as crypto-friendly debit cards. Payment giants Visa and Mastercard have rolled out support for cryptocurrencies on their vast networks, giving users access to their crypto portfolios and the ability to quickly and cheaply convert them into traditional currencies for spending purposes.
This is not a globally acceptable solution as many countries take a hard line stance against cryptocurrencies, with financial laws in place that ban citizens from buying, selling or even holding them. A crypto-fiat card, convenient as it may be, won't be of much use in Algeria or Bolivia. But in countries where Visa and Mastercard are accepted, your purchase power is assured.
Explaining its shifting attitude towards the digital economy earlier this year, Mastercard wrote that it "isn't here to recommend you start using cryptocurrencies. But we are here to enable customers, merchants and businesses to move digital value, traditional or crypto, however they want. It should be your choice, it's your money."
Mastercard's growing crypto partner network now includes wallet application Wirex, bitcoin payment service provider BitPay, digital asset manager Bakkt, and FDIC-insured mobile banking application LVL. Last week, the company announced that it was also joining forces with five startups to "solve global blockchain challenges" as part of its Start Path Crypto accelerator program.
As well as LVL, the companies participating in the program include smart-contract builder Ava Labs, AI-centric mobile banking app Envel, peer-to-peer savings platform Kash, and crypto rewards platform NiftyKey. Three more leading cryptocurrency service providers in the Asia Pacific region, Amber, Bitkub and CoinJar, will soon be launching crypto-funded Mastercard payment cards.
Visa has embraced digital assets with an equal fervour, having teamed up with over 60 crypto platforms including Circle, BlockFi, Coinbase, FTX and Anchorage. The firm even launched its own Global Crypto Advisory Practice last year, pitched at financial institutions keen to win or retain customers by expanding their services to include digital currencies, stablecoins, and NFTs.
Much of Visa's crypto business has been conducted in concert with payments startup Simplex, which specializes in providing users with on and off-ramp capabilities via both credit and debit cards. Simplex was this year acquired by Canadian payments processor Nuvei in a deal worth $250 million, and Nuvei is in turn rolling out branded Visa cards to its partners throughout Europe. There clearly are many different entities responsible for giving crypto more purchase power.
By enabling millions of consumers around the world to spend digital assets with a swipe of the card or smartphone, two non-crypto native firms have struck a surprising blow to the hegemony of traditional financial institutions when it comes to payments. The dominance of traditional players in the payment space has been waning for some time as innovative forms of digital payment have emerged. Square's Cash App boasts over 40 million monthly active users and digital wallets like Venmo, Revolut, and Wirex have also built large international user bases.
Banks No Longer Payment Kings
Many alternative payment platforms continue to allow users to fund their accounts through connecting their bank accounts. Crypto-friendly debit cards, for example, often display a fiat balance and crypto balance with account-holders able to shift funds accordingly and spend either fiat or crypto at the point of sale. In the future banks could be frozen out altogether. Stablecoins, a digital asset whose value is pegged 1:1 with the US dollar are now being supported on cards. 
Like other cryptocurrencies, stablecoins can be spent like cash anywhere Visa and Mastercard is accepted with cards such as the one offered by crypto platform Voyager Digital, which supports the USDC stablecoin. If many crypto users are only interacting with the legacy fiat system because of its supposed stability, they could turn their banks on fiat entirely by using assets like USDC and USDT as a kind of proxy fiat.
There is another benefit of stabelcoins as cryptoassets like bitcoin often come with a capital gain tax burden, when converted into cash and spent. Stablecoins are better suited to being a medium of exchange.
The debit cards offered by major crypto-native platforms such as Coinbase and Crypto.com, all in partnership with Visa, allow users to spend their trading profits (including those made from selling NFTs) and earn perks such as cashback to inspire loyalty. Crypto.com's rewards also include free Netflix, Spotify, Amazon Prime and unlimited airport lounge access, with support for around 90 digital assets.
Visa's various industry partnerships meant that over $1 billion was spent on their crypto-friendly cards in the first half of 2021 alone. While that is a drop in the ocean to a company whose payment volume totalled $8.8 trillion last year, the number is only going up.
"One thing that continues to put people off entering the space is the perceived difficulty of spending cryptocurrencies," notes Shahaf Bar-Geffen, the CEO of fintech platform COTI, "Banks are slow to adopt which causes issues, so a debit card that's connected directly to your crypto wallet, and accepted almost anywhere, is probably one of the easiest solutions to a crucial adoption problem."
Unlike many crypto platforms, COTI is built especially for payments. Its flagship COTI Pay product can process all payment types natively, both online and off, including crypto and stablecoins, credit cards, and even a merchant's native coin. That said, it too has partnered with Simplex (and by extension, Visa) for its debit cards.
It's fair to say that crypto-friendly debit cards can offer greater functionality than their fiat equivalents, which for the most part operate solely as payment cards. As well as cashback, they often come with referral bonuses, rebates on different services and even in some cases, lines of credit. The latter feature is offered by wallet maker Ledger's new Crypto Life card, which allows holders to obtain credit by using cryptocurrency as collateral. While such a thing is common in the burgeoning decentralized finance space, it's the first time such infrastructure has been available via a card.
The aptly named Crypto Life card will be available to customers in the U.K., France and Germany in the first quarter of 2022, and for US customers in the second quarter, with Ledger Chief Experience Officer Ian Rogers stating that it represents "a step toward replacing traditional bank accounts."
The gap between traditional finance and crypto is closing, and this can only be a good thing for consumers looking to get more bang for their bitcoin. The crypto debit card landscape is already crowded with competitors, expect the perks to get juicier and the number of supported digital assets to increase in the coming year.
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