Crypto Credit Cards, Once a White-Hot Trend, Have Fizzled
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For the past few years, crypto-earning credit cards have seemed destined to be the next big thing. Announcements about forthcoming products poured in throughout 2020, cards started hitting the market in earnest in 2021, and by mid-2022, it looked like the trend would only accelerate.
But that was before a crypto winter set in late that year and cooled the total value, or market cap, of the largest 100 cryptocurrencies by about 70% from a year earlier. The fledgling crypto credit card segment was not immune.
Some cards were discontinued entirely, others eliminated the ability to redeem rewards for cryptocurrency, and still others that were promised have yet to make it to the market. That's partly because card issuers face a different landscape in the wake of crypto winter.
"There are still some questions about access to crypto," says James Wester, director of cryptocurrency and co-head of payments at Javelin Strategy & Research, which provides insights to financial institutions. "There has been a change to questions about the regulatory environment, what it means (for issuers) from a risk and compliance standpoint."
As of Q1 2023, if you want a credit card that earns crypto, your options are limited to a small handful of products. Here's a look at why, and whether we can expect a crypto credit card comeback.
The crypto credit card crush
The timeline for the crypto credit card craze featured several milestones:
The frenzy kicked off in late 2020 when crypto lender BlockFi announced it was planning "the world's first-ever bitcoin rewards credit card."
Crypto exchange Gemini followed suit in early 2021 with an announcement that it, too, would soon be introducing a crypto-earning credit card.
SoFi technically beat them both to the punch in May 2021, adding cryptocurrency as a redemption option for rewards earned with the lender's existing credit card. (The BlockFi and Gemini cards became widely available to the mass market afterward.)
Summer 2021 got even hotter: Upgrade launched a bitcoin-earning credit card, and in August, the credit card from Venmo began offering cardholders the ability to use their rewards to purchase crypto.
By November 2021, the cryptocurrency market was valued at $2.7 trillion, according to news outlets such as Bloomberg and CoinDesk. In addition, a study on crypto that year commissioned by Visa found that 57% of consumers expressed an interest "to enter the ecosystem through cryptocurrency rewards," noting that banks with products that offer such rewards might see benefits in terms of customer acquisition and loyalty.
As 2022 progressed, more crypto credit cards were promised, including products from the money management platform Unifimoney and the crypto exchange Abra, whose transactions would be processed on the American Express network.
But by November 2022, major crypto companies Three Arrows Capital, FTX and BlockFi had declared bankruptcy — and the burgeoning crypto credit card market hit a wall.
The crypto credit card cool-off
The bankruptcy of the crypto exchange FTX on Nov. 11, 2022, had enormous ripple effects for parts of the crypto market whose fortunes were entwined with FTX's.
FTX invested in the crypto exchange BlockFi, which filed for bankruptcy weeks after FTX did. BlockFi then suspended the ability to make purchases with its credit card and stopped accepting applications.
FTX also invested in several cryptocurrencies, including Solana. Its value dropped below $13 in November 2022; Bitcoin and Ethereum hit a two-year low that month. Months later, SoFi began notifying customers that the crypto rewards redemption option on its credit card would be eliminated by Jan. 31, 2023.
Applications for the crypto credit cards from Abra and Unifimoney are still not open. Unifimoney CEO Ben Soppitt said there isn't a target launch date as of March 2023. Multiple efforts to reach Abra representatives for comment were unsuccessful.
"The question becomes about what the issuing banks are seeing in terms of incremental gain over incremental cost," Wester says. "As the value of crypto goes down, there are fewer drivers of business including transaction volume, which might have issuers thinking, 'Maybe we sunset a product or wait to see what will happen down the road.'"
Consumers' enthusiasm, too, may have waned as they learned of product problems. The Consumer Financial Protection Bureau logged various user complaints in its 2022 Complaint Bulletin, "including the inability to make purchases, issues closing their account, rejecting their claims for reimbursement on fraudulent charges, or failing to receive advertised rewards."
"If you're not able to calculate the value of a credit card because of the volatility of crypto, consumers might not want to tie themselves to that type of card," Wester says.
The crypto credit card comeback?
After FTX crashed, several players in the financial sector moved to mitigate risk. 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 are already moving on from crypto. Metropolitan Commercial Bank said in a January 2023 news release that "it will fully exit the crypto-asset related vertical," a dramatic turnaround for a bank that partnered with Crypto.com to issue a prepaid card. If more card-issuing banks back away from the crypto market, it could weaken the infrastructure behind crypto credit cards.
But that's far from certain. Other companies, after all, remain committed:
A spokesperson for PayPal, which owns Venmo, said the ability to purchase crypto with rewards would remain a feature of Venmo's credit card.
The credit card from Upgrade is still available, as is the card from Gemini. A Gemini spokesperson said the company plans "to add new features and rewards this year."
Brex added a crypto redemption option to its card for business owners in 2021, which remains a feature, according to its website.
"Interest in crypto has diminished somewhat, but not as much as one would think considering how far crypto's value has fallen," Wester says.
And while crypto has faced significant headwinds recently, so, too, have traditional financial institutions as they navigate the fallout of the collapse of Silicon Valley Bank and Signature Bank.
"That argues toward crypto (as) a hedge against that type of issue," Wester says. "Is that something that consumers are going to want?"
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