Opinion by: Vikram Arun, co-founder and CEO of Superform
For years, crypto-powered debit cards have been heralded as a bridge between digital assets and everyday commerce. They allow users to spend Bitcoin or Ethereum as easily as swiping a traditional card. But this convenience comes at a profound cost, one that betrays the very ethos of cryptocurrency. These products aren’t the future; they are a necessary but temporary scaffold, built on legacy financial rails that force users to choose between liquidity and ownership.
At their core, most crypto cards operate as debit cards with extra steps. They rely on banks as issuers, Visa or Mastercard as gatekeepers, and compliance frameworks that mirror traditional finance (TradFi). To make a purchase, users must first sell their crypto holdings into stable fiat, often USD. This action triggers a taxable event with the IRS, permanently removing assets from productive use and halting any yield they were generating. The card issuer then collects interchange fees—typically 1% to 3% plus a flat transaction fee—from the merchant. The infrastructure may appear decentralized on the surface, but its dependencies run deep into the old system.
The Hidden Cost of “Spending” Crypto
This model recreates the very trade-off crypto was designed to solve. By forcing liquidation to spend, it reinforces the false dichotomy: you can either hold an appreciating asset or use it as money, but not both. Every swipe converts a productive asset into an idle balance, making the system structurally negative-sum without heavy subsidies from issuers or token incentives. The promise of cryptocurrency—to be a sovereign, yield-generating store of value—is sacrificed at the point of sale.
Consider the tax implication alone. In the United States, converting cryptocurrency to fiat is a taxable disposal. Buying a $5 coffee with a crypto card could generate a capital gains reportable event, creating administrative complexity for what should be a simple transaction. This isn’t innovation; it’s a compliance-laden workaround that treats crypto as a commodity to be sold, not a foundational layer for new financial primitives.
Onchain Credit: Spending Without Selling
The alternative is already emerging: onchain credit. Instead of selling assets, users deposit yield-bearing collateral—such as staked ETH, yield-bearing stablecoins, or tokenized Treasury bills—to open a revolving credit line. When they swipe their card, their debt increases, but their collateral remains in place, continuing to earn yield. Assets are only sold if the user defaults and the position is liquidated, a process that is deterministic, transparent, and governed by pre-set, code-enforced parameters.
This model flips the script. Spending doesn’t diminish ownership; it increases debt against an appreciating, productive balance sheet. Current yields on stablecoins in reputable DeFi protocols range from approximately 5% to over 12% when including token incentives, meaning users can maintain spending power while their underlying assets compound. There are no forced conversions and no idle balances. The credit line itself becomes the spendable instrument, not the collateral.
Expanding the Definition of “Productive” Collateral
When credit is the primary primitive, the critical question shifts from “What can I instantly sell?” to “What can safely secure my debt?” This opens the door for a vast array of yield-generating assets to serve as first-class collateral. Vault shares from automated market makers, strategy positions from decentralized finance (DeFi) yield aggregators, and real-world asset (RWA) tokens like those backed by U.S. Treasuries can all secure credit lines without being converted to cash. Their value is priced continuously onchain, and risk is bounded by algorithmically set loan-to-value (LTV) ratios. This allows the most efficient, productive assets in the crypto economy to compete directly for a user’s balance sheet.
The Card Becomes a Thin, Replaceable Layer
In this paradigm, the physical or virtual card is demoted to what it should be: a simple user interface. It is not the source of truth. The real product is the onchain credit account—the ability to price a user’s entire collateral portfolio in real-time and authorize a spend against it. As reported by Cointelegraph, Visa crypto card spending soared 525% in 2025, demonstrating massive demand for crypto access. But that growth is built on the old model.
If credit logic is embedded in the card network, users remain locked into interchange fees, closed rails, and rigid KYC. If credit logic lives onchain in a user’s self-custodied wallet, the card becomes optional. Software, autonomous agents, and other payment interfaces can request authorization directly against the same credit line. The payment rail evolves, but the core primitive—transparent, collateral-backed credit—persists.
Managing Risk Through Radical Transparency
The immediate concern is volatility: what prevents a sudden drop in collateral value from triggering a liquidation during a grocery run? The answer lies in governance-set, conservative parameters. Protocols establish maximum LTV ratios—for example, allowing a user to borrow up to 70% of their collateral’s value. As the collateral earns yield, this buffer grows automatically. Pricing is continuous and onchain, and liquidation thresholds are transparent from the moment the credit line is opened. There are no surprise margin calls from a bank’s risk committee; the rules are code, visible to all.
This contrasts sharply with traditional credit, where risk is obscured by variable interest rates, hidden fees, and dense legal terms. Onchain credit makes risk explicit and communal. The community, through tokenholder governance, decides which assets are eligible collateral, how they are priced, and what LTVs are safe. Users opt-in by depositing, and from there, the protocol enforces the rules without discretionary access to funds or backdoor parameter changes.
The Inevitable Transition
Crypto cards won’t fail because they are conceptually flawed; they will become obsolete because they will succeed in their mission of onboarding. They are the training wheels for a world still tethered to legacy payment infrastructure. As digital wallets and blockchain-native payment systems scale—offering faster settlement, lower fees, and native integration with DeFi—the need for a bank-issued card as a mandatory intermediary will vanish.
The transition won’t be about abandoning cards entirely, but about decoupling spending from the card network. The card will remain a useful compatibility tool for merchants still on traditional rails, but the underlying financial logic will migrate onchain. The future belongs to systems where your assets never stop working for you, where liquidity is a function of collateralized credit, not forced sale, and where risk is managed by transparent code, not opaque committees.
Cards are an interface. Credit is the system. And the system is finally ready for its upgrade.
Opinion by: Vikram Arun, co-founder and CEO of Superform.
This opinion article presents the author’s expert view, and it may not reflect the views of Cointelegraph.com. This content has undergone editorial review to ensure clarity and relevance. Cointelegraph remains committed to transparent reporting and upholding
