In recent years, crypto-earning credit cards have seemed to be the next big thing. Announcements of upcoming products poured in throughout 2020, cards began to hit the market in earnest in 2021, and by mid-2022 the trend seemed only to accelerate.
But that was before a crypto winter set in at the end of that year, cooling the total value, or market cap, of the top 100 cryptocurrencies by roughly 70% from a year earlier. The emerging 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 hit 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,” said 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 in terms of 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 of the crypto credit card craze featured several milestones:
- The frenzy started 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 would also soon introduce a crypto-earning credit card.
- SoFi technically beat them both 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.)
- The summer of 2021 got even hotter: Upgrade launched a bitcoin-earning credit card, and in August, the Venmo credit card began offering cardholders the ability to use their rewards to buy crypto.
In November 2021, the cryptocurrency market was valued at $2.7 trillion, according to news outlets such as Bloomberg and CoinDesk. Additionally, a study on crypto that year commissioned by Visa found that 57% of consumers expressed interest “in entering the ecosystem through cryptocurrency rewards,” noting that banks with products that offer such rewards may see benefits in terms of customer acquisition and loyalty.
As 2022 progressed, more crypto credit cards were promised, including products from money management platform Unifimoney and 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 growing crypto credit card market hit a wall.
Cooling off with crypto credit cards
The bankruptcy of crypto exchange FTX on November 11, 2022 had huge ripple effects for parts of the crypto market whose fortunes were intertwined with FTX.
FTX invested in crypto exchange BlockFi, which filed for bankruptcy weeks after FTX did. BlockFi then suspended the ability to make purchases with the credit card and stopped accepting applications.
FTX also invested in several cryptocurrencies, including Solana. The value fell below $13 in November 2022; Bitcoin and Ethereum hit a two-year low that month. Months later, SoFi began notifying customers that the option to redeem crypto rewards on their credit card would be eliminated by January 31, 2023.
Applications for the crypto credit cards from Abra and Unifimoney are still not open. Unifimoney CEO Ben Soppitt said there is no target launch date of March 2023. Multiple attempts to reach Abra representatives for comment were unsuccessful.
“The question becomes what the issuing banks see in terms of incremental gain over incremental costs,” says Wester. “When the value of crypto goes down, there are fewer drivers for the business, including transaction volume, which can make issuers think, ‘Maybe we’re sunning a product or waiting to see what will happen down the road.’
Consumers’ enthusiasm may also have waned as they became aware of product problems. The Consumer Financial Protection Bureau recorded various user complaints in its 2022 complaint bulletin, “including the inability to make purchases, difficulty closing their account, denied refund requests for fraudulent charges, or failure 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 commit to that type of card,” Wester says.
Crypto credit card comeback?
After FTX crashed, several players in the financial sector moved to reduce risk. In early 2023, the Federal Reserve issued a statement signaling the desire for greater oversight of banks involved in cryptocurrency, including those that issue credit cards that earn crypto rewards.
Some banks are already moving on from crypto. Metropolitan Commercial Bank said in a January 2023 press release that “it will completely exit the crypto-active related vertical,” a dramatic turnaround for a bank that partnered with Crypto.com to issue a prepaid card. If more card-issuing banks withdraw from the crypto market, it could weaken the infrastructure behind crypto credit cards.
But it is far from certain. After all, other companies remain committed:
- A spokesperson for PayPal, which owns Venmo, said the ability to buy crypto with rewards will 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.
“Crypto interest has waned somewhat, but not as much as one would think considering how far the crypto value has fallen,” says Wester.
And while crypto has faced significant headwinds recently, so have traditional financial institutions as they navigate the collapse of Silicon Valley Bank and Signature Bank.
“It argues against crypto(as) a hedge against those kinds of problems,” Wester says. “Is it something consumers want?”
The article Crypto Credit Cards, Once a White-Hot Trend, Have Started to Fizzle originally appeared on NerdWallet.
