Author: Fairy,

Edit: TB,

The crypto industry is staging a strange "materialization" campaign: issuing cards.

Using USDT to order takeout, shopping on JD.com, and even swipe cards to pay for orders in street convenience stores. The digital assets that originally only exist on the screen are now quietly breaking into the real world with the help of encryption cards.

Issuing a card, is it the golden key to opening up Web3 and the real world, or is it a short and noisy traffic game?

This article will disassemble the driving factors, competitive landscape and potential risks behind this wave of crypto payments, and see this industry leap clearly.

The crypto card war begins

Capital is betting, and projects are racing. According to the list, there are currently 37 projects focusing on the crypto card business, many of which have received heavy bets from leading institutions. For example, KAST, the crypto credit card project, completed a US$10 million seed round of financing jointly led by Sequoia China and Sequoia India; crypto card issuer Rain was led by Norwest Venture Partners, Coinbase Ventures, Circle Ventures, etc., and received US$24.5 million in financing.

Crypto card items at a glance:

Source:

From Wanlian and Wansuo, now it has evolved to the "Wanka Era". This competition is not just the stage for startups. More and more top players are taking the field in person, and exchanges, wallets, and public chains are not willing to fall behind, trying to gain a place in the key entry point for on-chain assets to offline consumption.

There are a wide range of crypto card products on the market, and the following is a comparison of some representative projects:

Meanwhile, more cards are on the way:

• OKX will launch OKX Card in partnership with MasterCard
• Kraken joins MasterCard to launch crypto debit cards
• MetaMask, CompoSecure and Baanx will launch "metal card" together
• ....

A card has become a key springboard for connecting Web3 with the real world, and is also a symbolic symbol for crypto assets to move from "speculative products" to "user products". It is both a bridge and a battlefield. What is brewing behind this lively outbreak of the seemingly lively outfit?

Encryption card business

Crypto cards are essentially a prepaid card product. When a user recharges stablecoins such as USDT and USDC into this card, it does not "monetize" these assets into the card balance, but the issuer allocates a corresponding credit to the user in the bank account opened within the traditional card organization system such as Visa/Mastercard.

The operating mechanism behind it is a highly centralized funding model, which is mainly divided into three parts: asset custody (used to meet user withdrawal needs), asset interest generation (used to obtain income), and asset advancement (for exchange for fiat currency quota).

Source: @yuxiaoyu111

Under this model, the profit source of the card issuing platform is relatively clear. On the one hand, it is the card face fee and redemption handling fee, and on the other hand, it is the operating income brought by the platform's deposited funds. However, from the previous crypto card comparison chart, it can be seen that the competition between card fees and handling fees has been "opened". Almost all platforms are lowering the fee threshold to attract users, and even increasing the various "sugar coatings" - airdrops, consumption rebates, and discounts.

Therefore, crypto cards are actually a small profit business, and the platform can only achieve sustainable profits when it achieves large-scale flow of money and capital accumulation. For the platform, the essence of this business is actually to compete for the "payment portal" of users. The real contest is not only about brand building and channel occupation, but also a game around user traffic.

In addition, the expansion of this business by exchanges and wallets has natural advantages, which not only helps to enrich their business matrix, but also enhances market potential and development ceiling.

Hot and reefs

This wave of "card issuing wave" has brought many opportunities, but there are also many challenges and risks hidden behind it. There are many interpretations of the value and difficulties of crypto cards in the industry.

From a regional perspective, there are also differences in the acceptance of U cards in different markets. Researcher @sjbtc9 pointed out that in Australia, Europe and the United States, cryptocaine can avoid high inflation and make up for the inadequate financial services in the local area and is widely popular. In contrast, in areas such as Singapore, where the compliance system is relatively complete, users already have smooth withdrawal channels and their demand for crypto cards is relatively cold. In the domestic market, crypto cards are often used to pay for overseas service subscriptions such as ChatGPT.

In addition, crypto cards also play the role of "alternative middleman" in certain areas.For example, in the context of high OTC transaction risks, U card provides a more direct and stable capital entrance and exit to a certain extent.

But the reefs are also surging. Compliance and risk control have always been challenges that crypto cards cannot avoid. Encrypted KOL Yue Xiaoyu once shared that OneKey Card has become popular quickly due to its excellent product experience, but under the pressure of compliance, it has suspended mainland KYC and completely removed Card business. This not only exposes the high uncertainty under policy supervision, but also reflects that the crypto card business is difficult to continue to expand under the premise of weak user growth.

As community user @agintender said, under the surface of the encrypted card is the "risk control hell": how to deal with the frozen, stolen, and recovered funds, how to cooperate with investigations and graded management of user funds, and how to establish reasonable customer profiles and story narrative capabilities are all core issues that encrypted cards must solve.

Security risks are also a hidden danger that cannot be ignored. In February this year, cardholder Infini was attacked and lost more than $49 million. Encrypted KOL @_FORAB revealed that after the accident, multiple U card service providers entered the maintenance state and even suspended the issuance of cards. This incident reflects that security and risk prevention are one of the keys to the sustainable development of crypto cards.

The rush of card issuing is not only the competition between cards, but also the dispute over the right of way between Web3 and the real world. Every metal card flashes not only the brand logo, but also the knock on the door of the crypto economy hitting mainstream society.

Time will give the answer to success or failure. Who will stand out from the crowd.