The crypto-earning credit card has been the next big thing for the past few years. In 2020, announcements about new products began to flood the market. Cards first hit the markets in 2021. By mid-2022, the trend was only set to accelerate.
However, that was before the crypto winter hit in the late ’90s. It cooled the market cap or total value of the 100 largest cryptocurrencies by 70% compared to a year ago. The crypto credit card market was not immune.
Some cards were canceled completely, while others had no redemption option for cryptocurrency rewards. Others were not even offered and have yet to be released to the public. This is partly due to the fact that card issuers now face a new landscape after crypto winter.
James Wester, Javelin Strategy & Research’s director of cryptocurrency, and co-head for payments, says that there are still questions about crypto access. The company provides insight to financial institutions. There has been a shift in the questions regarding the regulatory environment and what it means for issuers from a compliance and risk perspective. ”
You can only choose a few products if you are looking for a crypto-friendly credit card. Let’s take a look at the reasons and see if a crypto-friendly credit card is possible.
Crush Crypto credit cards
There were several milestones in the timeline of the crypto credit card craze:
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In late 2020, crypto lender BlockFi declared that it was creating “the first ever bitcoin rewards credit card.”
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In early 2021, Crypto exchange Gemini announced that it would soon introduce a crypto-earning credit cards.
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SoFi technically beat them both in May 2021. They added cryptocurrency to their existing credit cards as a redemption option. The BlockFi and Gemini cards were made widely available to the masses afterward. )
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Summer 2021 was even more hot: Upgrade launched a Bitcoin-earning creditcard and in August, Venmo started offering cardholders the opportunity to use their rewards for crypto purchases.
According to CoinDesk and Bloomberg, the market for cryptocurrency was worth $2.7 trillion by November 2021. A Visa study that was done in 2017 on cryptocurrency found that 57% consumers wanted to “enter the ecosystem through crypto rewards.” This suggests that banks that offer such rewards could see benefits in terms customer acquisition and loyalty.
More crypto credit cards were announced as 2022 progressed. These included products from Unifimoney, the money management platform, and Abra, the crypto exchange. All transactions would be processed by the American Express network.
However, by November 2022, three major crypto companies Three Arrows Capital and FTX had filed for bankruptcy. The burgeoning cryptocurrency credit card market was at a halt.
The cool-off for crypto credit cards
The collapse of crypto exchange FTX, on November 11, 2022 had huge ripple effects for those parts of the crypto market whose fortunes were intertwined with FTX.
FTX invested in BlockFi, a crypto exchange that was filed for bankruptcy just weeks after FTX. BlockFi suspended purchases using its credit card, and also stopped accepting applications.
FTX also invested on several cryptocurrencies including Solana. Its value fell below $13 in November 2022, when Bitcoin and Ethereum reached a two year low. SoFi started notifying its customers months later that the crypto rewards redemption option on their credit card would be removed by January 31, 2023.
Applications for crypto credit cards from Unifimoney and Abra are not yet open. Ben Soppitt, CEO of Unifimoney, said that there’s no target launch date for the cards as of March 2023. Multiple attempts to reach Abra representatives were unsuccessful.
Wester states, “The question is about what the issuing bank are seeing in terms incremental gain over incremental costs.” “As crypto’s value drops, there are less drivers of business, including transaction volume. This might lead to issuers wondering if they should sunset a product, or wait and see what happens down the line. ‘”
The enthusiasm of consumers may also have diminished as they learn about product problems. In its 2022 Complaint Bulletin the Consumer Financial Protection Bureau recorded a variety of user complaints, including inability to purchase, closing their account, rejection of fraudulent charges claims, and failure to receive advertised rewards. ”
“If it is difficult to calculate a credit card value due to crypto volatility, consumers may not want to tie themselves with that type of card,” Wester states.
The return of the crypto credit card?
Many financial players took steps to reduce risk after the crash of FTX. In early 2023, the Federal Reserve released a statement signaling its desire for greater supervision over banks that are involved with cryptocurrency, including those that issue crypto-reward-earning credit cards.
Some banks have already moved on from cryptocurrency. Metropolitan Commercial Bank announced in a January 2023 press release that it would “fully exit the crypto-asset-related vertical.” This is a remarkable turnaround for a bank which partnered with Crypto.com in order to issue a Prepaid Card. It could lead to a weakening of the infrastructure behind crypto credit card cards if more banks stop issuing cards.
However, that is far from certain. However, other companies remain committed.
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Venmo is owned by PayPal. A spokesperson for PayPal stated that the ability to buy crypto with rewards will remain a feature on Venmo’s credit cards.
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The Upgrade credit card is still available as well as the Gemini card. Gemini spokeswoman said that the company will “add new features and reward this year.” ”
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Brex introduced a crypto redemption option in its business card for owners in 2021. This feature remains available on its website.
Wester states that interest in crypto has declined somewhat, but not as significantly as one might think given how much crypto’s value is falling.”
Wester states, “That argues towards crypto (as a hedge against this type of issue.” Is this something consumers will want? ”