Tapping a Credit Card to Buy Coffee With Bitcoin Is…Kinda Wrong | Strata Research
episode
Talking Tokens: Crypto, Onchain Finance, Investing
15 min
2 speakers
5 chapters
transcribed 1 month ago
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What is the main topic discussed in this episode?
Welcome back to Talking Tokens and to another edition of Strata Research, the series where we sit down with our institutional research team to break down one major timely trend across the industry. Last time, Alex and I got into crypto neobanks, the apps rebuilding, the Chime and Revolute playbook on stablecoin Rails. And today we're zooming in on one piece of the stack that everybody thinks they understand and Alex and I would probably argue that nobody does almost. Uh the crypto card. Alex just published a report arguing that while the product may have originally been built for consumers, institutions are actually the ones using it. And so I think it's a great story because picture this in your head someone tapping a metal card, buying coffee with Bitcoin, and it turns out to be almost exactly wrong.
So Alex, welcome back on and I'm sure we'll get into it.
Yeah. All right. Good to be here.
Yeah, it's great to have you. I know in your report it opens with a claim that money moving through crypto cards in twenty twenty six mostly isn't retail. And I was actually surprised by that as someone who has been like, you know, covering this space for a while. So walk us through that.
What exactly is a crypto card and how does it work under the hood?
And while you're there, like what actually is a crypto card mechanically? Because you would argue that a lot of them aren't what they actually look like on the surface level.
Yeah. So um I guess I'll start off with what is a crypto card. Um it's uh pretty straightforward, right? It's a it's a card that is funded with crypto. You can use your stablecoin balance to pay for everyday goods. It's typically powered by Visa or MasterCard. Um and the user experience is pretty similar to like what you get with a debit or credit card um on both on both sides of it, like from your point of view and also from the m merchant point of view. Um Under the hood, it gets a little more complicated. There's a few different like routes that it can take, right? So um basically how they work is that you fund you have an account, you fund it with stable coins, you have a physical card or a virtual card, you do tap to pay at any you know cafe when you're buying your latte or what whatever it is.
Um and then on the back end, uh, you know, Visa or MasterCard is gonna go and handle uh that transaction and basically just like either off ramp the uh stable coin and then uh settle the transaction off-chain and then send the merchant dollars or settle the chain or s settle the transaction on-chain um and then they'll handle the off-ramp later and send it to uh to the merchant in dollars. So you're spending in stable coins the merchant is spend uh receiving dollars and fiat um but like under the hood it gets a little more complicated um then I wanna ask answer, I guess, the the first part of the question that you you raised there, which was, um, you know, who's really using it?
I think who's using it, yeah.
Yeah, who's using it, right? Um I I think if like the listeners, if you if you go and ask your friends or you know if you're in crypto, um I I think you it'd be hard pressed to find people that are using stablecoin cards uh as their daily Card, yeah.
Yeah, I think I don't know if it would make sense, right? Yeah.
I mean I mean I personally don't have the many friend I have a few, but even within the crypto crowd, I think it's very rare. Um and I think people were looking at this originally thinking this is gonna be a huge unlock for consumers. Um, but it it really hasn't. And there's a few reasons for that. Um Mostly that the uh the existing offerings that people have in the US and and Western Europe are really good. You know, why would I switch to using stable coins when I have my credit card that has great fraud protection?
Why haven’t consumer crypto cards taken off in developed markets?
If a tr uh illegal transaction happens, I can cancel it. Um I get points, you know, I I can book a a flight, you know, via my stable coin. And if I have a problem then they'll handle it with, you know, jet blue or delta or whatever. Um, and it it takes a long time to like build up the the rewards system that people have gotten very accustomed to with with uh with stablecoin cards.
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Chapters
5 chapters
1
What is the main topic discussed in this episode?
0:07–1:10
2
What exactly is a crypto card and how does it work under the hood?
1:10–3:34
3
Why haven’t consumer crypto cards taken off in developed markets?
3:34–7:11
4
Where is the real value of crypto cards – B2B and institutional use?
7:11–11:27
5
How are Visa and other networks shaping the future of crypto cards?
11:27–15:38
Speakers
2 identifiedMore from Talking Tokens: Crypto, Onchain Finance, Investing
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