In the world of digital finance, cryptocurrency credit cards or “crypto credit cards” are becoming a popular way to make cryptocurrency assets versatile. These cards will change the ways that we view the handling of money.
But what are they, and why are they hot right now?
Cryptocurrency credit cards are essentially representations (in card form) of financial agreements backed by cryptocurrency assets. They rely on the transparency of crypto coins and tokens, and the ability to streamline all sorts of financial processes.
Where traditional credit cards are backed by your credit rating and intricate underwriting from a bank, crypto credit cards are backed by your crypto assets. In a way, this sort of solves two problems at once: first, uncollateralized loans are typically riskier. Second, before this type of innovation, it was sometimes hard to spend crypto.
Origins of the Crypto Credit Card
Several years ago, cryptocurrencies seemed much newer and more exotic than they seem now. Holders often had no easy option for converting Bitcoin or some other cryptocurrency into spendable cash. They had to go to a particular platform and convert the cryptocurrency into fiat funds, liquidating their stake.
Then a light bulb went on in the fintech community, and people realized that with the right verification setups and wallet advances, cryptocurrencies can be used to eliminate the need for labor-intensive approval processes. At the same time, two major evolutions were happening in the financial world – decentralized finance, and tokenized assets.
Decentralized finance is the idea that you can use decentralized cryptocurrency assets to generate all sorts of financial agreements. Asset tokenization relies on a similar idea – the idea that a traditional asset, whether it’s fiat money or real estate or anything else, can be accurately represented by a cryptocurrency smart contract or a token of some form.
With this in mind, the cryptocurrency credit card was born, to allow quick and easy access to fiat-friendly liquidity through the easy verification of crypto assets.
Benefits of Cryptocurrency Credit Cards
The biggest overall benefit of crypto credit cards is that they make things like taking out credit and earning interest so much easier and quicker. All sorts of roadblocks, many involving the kind of underwriting mentioned above, are eliminated. It saves time, and it saves paper. And ink.
In traditional lending and borrowing, a lot of the hard work that financial companies perform involves verifying assets and moving authenticated money around into different pots. Crypto credit cards make all of that back and forth unnecessary. Many of these cards have earning features based on staking, a state-of-the-art process for verification, and easy credit features for instant collateralized lending.
Another major benefit of crypto credit cards is low fees. Again, because the card is collateralized by crypto, there are hardly any of the high interest rates of conventional credit cards. The crypto cards are also unique in offering low international conversion fees for people spending on the go in different fiat currencies around the world.
Yet another major benefit of crypto credit cards deserves some attention because of how valuable it is for many consumers. Cashback rewards and subscription reimbursement are an exciting part of holding one of these cards in your wallet. From entertainment to travel, cardholders get easy cashback and perks through the crypto verification process.
Some Top Crypto Cards
Different popular crypto credit cards are set up differently, to do different things. For example, Nexo made its bones on its crypto-backed instant loan capability for up to $2 million, with a range of crypto assets. Other offerings like Monolith and BlockCard offer their own low fees and perks and other attractive features.
Then there’s the Crypto.com MCO Visa card that’s really turning heads within the industry.
The Crypto.com MCO credit card has all of what we discussed above, and more – for example, it has automatic subscription cashback for Netflix and Amazon Prime, as well as the popular music engine Spotify. It has similar features for both Expedia and AirBnB, so that your flights and your vacation homes also help you tally up value points.
Another important thing that Crypto.com has done in this field involves innovating how tokenized assets work. This was evident in the firm’s MCO swap program.
Initially, Crypto.com used its Monaco tokens for “MCO” value. But then the CRO token was born, and the company found it would be easier to denominate value in CRO.
Why is this important? Because it shows how easy it is, with the right technique and oversight, to change tokenized asset strategies and improve financial platforms. None of this was possible even 20 or 30 years ago, because of all of the rapid innovation around digital finance. The blockchain itself kicked off the evolution of a whole new finance ecosystem, and we’re still seeing the potential unfold.