Crypto cards under the spotlight: A pricey thrill-ride for an insiders club

If there’s ever been a need for a trigger warning in crypto reporting, it would precede what you’re about to read. Lovers of crypto-spending, you may want to shield your eyes now.

There's simply no dancing around it: Crypto cards are a rip-off.

Crypto debit-cards broke onto the scene en masse a few years ago, offering enthusiasts the thrill of being able to spend their hard-earned digital assets almost anywhere with the simple touch of their contactless MasterCard. Many were culled as WaveCrest, a major card provider, got the cold shoulder from Visa, but a few have survived. It’s as close to using crypto as cash as you can get, and according to ever-optimistic marketing departments, the key to mainstream adoption, safely linking one’s digital wallet to a physical card.

But while it may be a novelty to be able to go through everyday life using crypto, the underlying fees for speak for themselves. The table below lays out some of the biggest card providers in Europe and Asia (where most are still able to operate) and their current associated costs.

These numbers are based off The Block's own research

In short, that means for a £100 dinner bought in Bitcoin, you'd pay £102.50 just for using Coinbase’s Visa debit card rather than your normal Visa (and that’s excluding the $5 card-issuance fee). Once or twice might be forgivable, but on multiple purchases, it surely becomes unsustainable.

It's hardly a surprise then that sources say Coinbase’s card, recently issued in the UK, hasn't seen considerable uptake, although the firm refuses to share specifics. 

Even BitPay's card, which is available exclusively in the U.S., appears to charge a 2% loading fee even though it doesn't charge any transaction fees.

That these cards are being pitched as the key to adoption is ironic, when what’s being offered to an already skeptical public is just a more expensive, convoluted, often volatility-prone way of spending money. Sure, there’s the privacy perk for those shopping in the back streets of Soho (the equivalent of New York’s red light district) in that it won’t show up on your bank statement. But for coffee? A sandwich? These are the staples of the “masses” crypto is supposed to be drawing in, and it’s not exactly an attractive offer.

“There are several challenges. People are not used to buying sandwiches with Apple stock, and most crypto assets fall into a similar mental bucket,” said Lex Sokolin, former director of Autonomous research. “Riding the open loop networks of Visa and MasterCard is a faster way to market, but not a transformational one in terms of industry economics.” 

It wouldn’t be unfair to call most of these cards a sexy marketing stunt; pulling at the heartstrings of the enthusiasts by showing their commitment to “adoption” while chewing down a generous pay-off. If I were to be generous, I’d say this is a fun venture with little downside - a startup’s favourite recipe.

But it’s not all bad. Two London-based users told The Block the fees are a price they’re willing to pay for the thrill.

“I don’t like it, but I’m paying for a service and I’m willing to do it," said one crypto enthusiast who says he uses crypto-cards for most of his purchases to avoid government surveillance. He added however that he had his services interrupted several times as card-providers come and disappear.

Another said that he uses a crypto-card much more sporadically, but for the occasional thrill, the premium is worth it.

"It’s partly just the novelty right. I went to Sainsbury's and bought my lunch with Litecoin effectively which is really cool if you work in the space. It becomes accessible," said the source, who works for a crypto company. "It's like the mini bar in a hotel: we all know we shouldn’t use it but we do." He also added the card could only be used domestically at the moment because overseas charges were so extortionate. 

In fairness, the fees are likely raised by the cost of having to pay MasterCard for the privilege of having them as a partner in the murky crypto world. Indeed, despite criticisms that these cards offer a platform for money laundering, the world’s biggest payment-providers are hardly going to jump into bed with them before scrupulously vetting their onboarding systems. As such, it’s still “much easier to launder cash than crypto”, according to one source.

It’s also simple economics that firms like Coinbase should charge what they want in the absence of any serious competition.

Regardless, on the bright side, a more competitive offering could be on the horizon, as the likes of Bakkt and Gemini beaver away to launch their own payment processing systems for retailers like Starbucks. Meanwhile, cheaper alternatives like the Lightning Network and crypto-installation firms like TravelByBit are working on providing their services at an increasing number of retailers. These have the potential to force card fees down in the future. It may even mean a return for cards like Xapo's, which famously had no fees but retired its services last year.

So when it comes to crypto-cards, it’s a case of whatever floats your boat. But don’t expect it to be cheap - or to be the answer to adoption.