Why do crypto projects flock to issue cards? A battle for access rights between Web3 and the real world

The crypto industry is staging a peculiar "physicalization" movement: card issuance.

Ordering takeout with USDT, shopping on JD.com, or even paying with a card at a convenience store on the street. Digital assets that originally existed only on the screen are now quietly breaking into the real world with the help of crypto cards.

Is card issuance the golden key to connect Web3 with the real world, or a short-lived traffic game?

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

The crypto card war has started in full swing

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

From Wanlian and Wansuo, it has now evolved to the "Wanka Era". This competition is not just a stage for startups. More and more top players are personally involved, and exchanges, wallets, and public chains are unwilling to lag behind, trying to occupy a place in the key entrance for on-chain assets to offline consumption.

At the same time, more cards are on the way:

OKX will cooperate with Mastercard to launch OKX Card

Kraken has reached a cooperation with Mastercard to launch a crypto debit card

MetaMask, CompoSecure and Baanx will jointly launch the "metal card"

....

A card has become a key springboard to connect Web3 with the real world, and it is also a symbol of crypto assets moving from "speculative products" to "usable products". It is both a bridge and a battlefield. What is brewing behind this seemingly lively card issuance trend?

The business of crypto cards

Crypto cards are essentially a prepaid card product. When users recharge stablecoins such as USDT and USDC into this card, these assets are not "cashed" into the balance on the card, but the card issuer allocates a corresponding amount to the user in the bank account opened in 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 (used to obtain income), and asset advance payment (converting legal currency quota).

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 exchange fee, and on the other hand, it is the operating income brought by the platform's deposited funds. However, as can be seen from the crypto card comparison chart in the previous article, the competition for card fees and handling fees has already "opened", and almost all platforms are lowering the fee threshold to attract users, and even adding various "sugar coatings" - airdrops, consumer rebates, discounts.

Therefore, crypto cards are actually a thin profit business. The platform can only obtain sustainable profits when it achieves large-scale water flow and fund precipitation. For the platform, the essence of this business is actually to compete for the user's "payment entrance". The real competition is not only about brand building and channel occupation, but also a game around user traffic.

In addition, exchanges and wallets have natural advantages in expanding this business, which not only helps to enrich their business matrix, but also enhances market potential and development ceiling.

Boom and reefs

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

From a regional perspective, different markets have different acceptance levels of U cards. In Australia, Europe, the United States and Latin America, crypto cards are popular because they can avoid high inflation and make up for the lack of local financial services. In contrast, in regions with relatively complete compliance systems such as Singapore, users already have smooth withdrawal channels, and the 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 have also assumed the role of "replacing middlemen" in some regions. For example, in the context of high OTC transaction risks, U cards provide a more direct and stable entrance and exit for funds to a certain extent.

But reefs are also surging. Compliance and risk control have always been challenges that crypto cards cannot avoid. Crypto KOL Yue Xiaoyu once shared that OneKey Card quickly became popular due to its excellent product experience, but under compliance pressure, it successively suspended mainland KYC and completely shut down the 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, crypto cards are "risk control hell" under the surface: how to deal with funds being frozen, stolen, and recovered, how to cooperate with investigations, hierarchical management of user fund flows, and how to establish reasonable customer profiling and storytelling capabilities are all core issues that crypto cards must solve.

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

The surge in card issuance is not just a competition among cards, but also a dispute over the right of passage 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 to the mainstream society.

Whether it succeeds or not, who will stand out, time will give the answer.