Isn't cryptocurrency supposed to be peer-to-peer cash? Why would I need a credit card?

While crypto enables people to transact peer-to-peer, this feature can only be taken advantage of within the network itself. If your local furniture store doesn't accept cryptocurrency such as Bitcoin, you'll have to pay via another method! Further, crypto (at least in its current state on 'layer one') isn't particularly useful as a medium of exchange for small-value items like your morning coffee or daily groceries. Why?

1. Transaction fees are often significantly higher than with status quo payment networks like Visa and Mastercard.

2. Transaction times are significantly longer than with status quo payment networks. Depending on the fees paid and the current level of network congestion, it takes anywhere from a few seconds to an hour for most crypto transactions to confirm 'on chain' - and only when a transaction is confirmed on chain, meaning it's included in at least one block (and usually more than one block) on the network, can final settlement be considered to have occurred.

For these reasons, crypto’s use as a medium of exchange (on layer one) is currently restricted to higher value items where transaction times and costs are less consequential - like buying a car, boat, or house.

Note that so-called 'layer two' solutions like the Bitcoin Lightning Network or Ethereum’s Arbitrum solve the above-described challenges by enabling 'off chain' transactions. This is similar to how the Visa/Mastercard network functions in that millions of small transactions can go through quickly, while final settlement occurs in large batches at a later stage. Unfortunately, Lightning Network is even less widely deployed than the standard 'layer one' Bitcoin network, meaning the places you can use it to actually buy things are few and far between. The same goes for the layer two solutions of other networks like Ethereum. Therefore, for the time being at least, crypto debit cards help make crypto useful as a medium of exchange while layer two solutions are still in their infancy.

How do crypto debit cards work?

Crypto debit cards are like prepaid credit cards. You can use them to make payments in person or online exactly like you would with any other credit card. You either enter your card details or swipe your card to make a payment, and merchants receive cash in their local currency. Many crypto debit cards also allow you to take out cash from ATMs.

The two methods for funding crypto debit cards are:

1. Top up your card by selling crypto to cash in lump sums. In this case, you spend the cash as you make purchases using the card.
2. Link your crypto wallet to the card such that each time you make an online or in-store purchase, you're effectively selling the required amount of cryptocurrency for cash.

What are the fees for crypto debit cards?

Depending on the provider, your crypto debit card may or may not have an annual fee. You may also be charged a small fee each time you convert your crypto to cash.

What's the difference between a virtual and physical crypto debit card?

With virtual crypto debit cards, you're restricted to making purchases online. Physical crypto debit cards can be used both online and in person at any merchant that accepts the credit card type (eg. Visa or Mastercard).

How can I get a crypto debit card?

Since crypto debit cards are offered by registered businesses, you'll need to provide identity documents in order to be approved. This isn't a credit check, but rather a requirement for compliance with anti-money laundering regulations. Each crypto debit card provider can only offer its card in the specific regions it has obtained the required license.