Crypto Payment Future: On&Off Ramps and Payment Cards

Author: Jiyun Kyung, Business Development (https://www.linkedin.com/in/jiyunkyung/)

[TL;DR]

• Cryptocurrency payment cards utilize blockchain technology to increase the efficiency and transparency of existing card payment systems, offering advantages such as reduced fees and faster settlements.
• Traditional card network companies like Visa and Mastercard are also actively entering the cryptocurrency market, pursuing innovation through various partnerships and programs.
• Current cryptocurrency payment cards are transitional forms for user familiarity and compatibility with existing infrastructure, with the potential to develop into more innovative forms in the future.
• The evolution of cryptocurrency payment systems is expected to have wide-ranging effects, including increasing financial inclusion, building borderless payment systems, and creating efficient and transparent financial ecosystems.

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1. Introduction

암The cryptocurrency market has seen remarkable growth over the past decade. This new financial system, which began with the emergence of Bitcoin, is now challenging mainstream financial systems with numerous investors and users worldwide.

To fully realize the potential of crypto, one of the important challenges for popularization - 'accessibility' - must be addressed. The accessibility issue of crypto can be examined from two main aspects:

First, ordinary users should be able to easily buy and sell cryptocurrencies. Second, purchased cryptocurrencies should be conveniently usable in everyday transactions.

This basic improvement in accessibility is essential for the popularization and practical use of cryptocurrencies. The most important things to solve the accessibility problem are 'On-Ramp' and 'Off-Ramp'. On-ramp acts as an entry point for converting fiat currency to cryptocurrency, while off-ramp serves as an exit point for converting cryptocurrency back to fiat currency.

Recently, cryptocurrency payment cards (Crypto Debit & Credit Cards) that implement the concepts of on-ramp and off-ramp closer to real life are gaining attention. In terms of process, on-ramp involves purchasing cryptocurrency with fiat currency using a credit card, while off-ramp involves purchasing goods or services with cryptocurrency through a debit card connected to a wallet. These cards greatly enhance the practicality of cryptocurrencies by processing payments through real-time conversion between cryptocurrencies and fiat currencies.

The emergence of cryptocurrency payment cards is leading to the entry of traditional financial companies like Visa and Mastercard into the cryptocurrency market. The participation of these giant companies is contributing to increasing the credibility and stability of cryptocurrencies.

In addition to Visa and Mastercard, several cryptocurrency exchanges and protocols aiming to build payment systems using cryptocurrencies have already launched or announced plans to launch cryptocurrency payment cards.

This content will explore the concepts of on-ramp and off-ramp, examine various forms and real-world examples of these services, analyze the operating principles and key cases of cryptocurrency payment cards, and take a detailed look at Visa and Mastercard's strategies for entering the cryptocurrency market.

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2. Concepts of On-ramp and Off-ramp

2.1 Definition of On-ramp and Off-ramp

In the cryptocurrency world, the terms 'on-ramp' and 'off-ramp' are very important concepts. These two terms are used to describe the connection points between traditional financial systems and the cryptocurrency ecosystem.

An 'On-ramp' refers to the process or service of converting fiat currency into cryptocurrency. Simply put, it can be seen as a gateway for users to enter the cryptocurrency world. For example, exchanging dollars or won for Bitcoin or Ethereum is considered an on-ramp.

An 'Off-ramp' is the opposite concept of an on-ramp, referring to the process or service of converting cryptocurrency back into fiat currency. It's a method used by cryptocurrency investors or users when they want to realize profits or need cash. For instance, exchanging Bitcoin for dollars or won is considered an off-ramp.
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2.2 Importance of On-ramps and Off-ramps

On-ramp and off-ramp services play a crucial role in the growth and development of the cryptocurrency ecosystem. Without these services, cryptocurrencies would remain a closed system circulating only within a limited group of users, disconnected from existing financial systems.

On-ramps and off-ramps increase liquidity in the cryptocurrency market and promote market expansion by allowing more people to experience and use cryptocurrencies. These services also contribute to increasing the practical value of cryptocurrencies. By enabling users to easily exchange between fiat currencies and cryptocurrencies as needed, cryptocurrencies can establish themselves as practical payment methods rather than mere speculative instruments.

Moreover, on-ramp and off-ramp services play an important role in enhancing the stability and reliability of the cryptocurrency market. By providing a safe trading environment that complies with regulations, they can improve the general public's perception of cryptocurrencies and attract institutional investors.

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3. Types and Forms of On-ramp & Off-ramp Services

3.1 Centralized Cryptocurrency Exchanges

중앙Centralized cryptocurrency exchanges are the most common and well-known form of on-ramp and off-ramp services. Large exchanges like Coinbase, Binance, and Upbit fall into this category. These exchanges provide platforms for users to exchange between fiat currencies and cryptocurrencies.

As an on-ramp function, users can deposit fiat currency into their exchange account via bank transfer or credit card, and then use it to purchase various cryptocurrencies. Most exchanges offer instant purchase features based on real-time market prices, and some exchanges support various order types such as limit orders, allowing users to buy cryptocurrencies at their desired price.

As an off-ramp function, users can exchange their held cryptocurrencies for fiat currency and withdraw it to their bank account. Generally, exchanges process withdrawals after verifying the user's identity, in compliance with Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations.

The main advantages of centralized exchanges are undoubtedly their high liquidity and ease of use. Due to the large number of users and trading volume, fast trade execution is possible, and most major cryptocurrencies and many altcoins can be traded. They also provide intuitive interfaces that even beginners can easily use, lowering entry barriers. Some exchanges offer additional services such as staking and lending, providing extra value to users.

However, the security risks due to their centralized structure are pointed out as a major disadvantage. Exchanges can be targets for hacking, and there have been several cases of large-scale hacking incidents. Also, the need to provide personal information for KYC procedures can be burdensome for users who value privacy. There are also regulatory risks where services may be restricted due to regulatory changes in different countries, and considerations such as daily withdrawal limits or delays in large-scale withdrawals should be taken into account.
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3.2 P2P (Peer-to-Peer) Trading Platforms

P2P trading platforms are services that enable direct transactions between individuals without intermediaries, with LocalBitcoins and Paxful being prime examples. These platforms play a crucial role in bridging the gap between traditional financial systems and the cryptocurrency ecosystem.

As an on-ramp function, users looking to buy cryptocurrencies can find sellers on the platform and trade directly. In this process, various payment methods (bank transfer, cash transactions, gift cards, etc.) can be chosen, allowing even users who have difficulty using traditional financial systems to easily purchase cryptocurrencies.

For off-ramp functionality, users wanting to sell cryptocurrencies can find buyers for direct transactions and receive payment in their preferred method. This is particularly important in regions or countries where traditional banking systems are not well developed.

The main advantage of P2P platforms is their support for various payment methods. They provide opportunities for cryptocurrency market participation even to users who have difficulty using traditional banking systems. Also, some transactions can maintain a high level of anonymity, making it an attractive option for users who value privacy. Global accessibility is another big advantage, allowing transactions in local currencies from anywhere in the world. The ability for sellers and buyers to negotiate prices directly, enabling flexible pricing, is also a characteristic feature.

However, P2P platforms also have disadvantages. As transactions are between individuals, there is a risk of fraud, requiring users to exercise extra caution when trading. Liquidity may be lower compared to centralized exchanges, making large-scale or quick transactions difficult. Also, fees tend to be high in exchange for convenience, and as transactions are between individuals, it may take time to complete a trade.
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3.3 Cryptocurrency ATMs

Cryptocurrency ATMs serve as physical interfaces connecting the real world with the digital cryptocurrency world, providing both on-ramp and off-ramp services. These ATMs are installed in forms similar to regular cash ATMs, making them easily accessible to users.

For on-ramp functionality, users can insert cash into the ATM and select the desired cryptocurrency to purchase. The purchased cryptocurrency is immediately transferred to the user's digital wallet. This process is very simple and intuitive, making it easy even for users unfamiliar with online exchanges.

Off-ramp functionality is provided by some ATMs, allowing users to sell their held cryptocurrencies and withdraw cash. While this feature is not yet available on all cryptocurrency ATMs, it is gradually expanding.

The main advantages of cryptocurrency ATMs are accessibility and immediacy. Even users who have difficulty using online services can easily use them, and transactions are processed quickly as they occur instantly. Also, some ATMs do not require identity verification for small transactions, providing a certain level of anonymity. The ability to trade with cash without a bank account or credit card is also a significant advantage.

However, cryptocurrency ATMs also have some disadvantages. The biggest drawback is high fees. Fees are very high in exchange for convenience, which can be a significant burden on users. Also, the limited locations of ATM installations can reduce accessibility. Most ATMs only support major cryptocurrencies like Bitcoin and Ethereum, which is pointed out as a limitation in terms of choice. Additionally, there are daily transaction limits, making them unsuitable for large deposits or withdrawals.

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3.4 Payment Services and Fintech Apps

Recently, mainstream payment services and fintech apps like PayPal, Venmo, and Cash App have been adding cryptocurrency trading features. These services are providing easy entry points into the cryptocurrency market by leveraging their existing user base.

As an on-ramp function, users can directly purchase cryptocurrencies with fiat currency within the app. Most payments are made through linked bank accounts or credit cards, and cryptocurrencies can be easily purchased through a user-friendly interface.

For off-ramp functionality, users can exchange cryptocurrencies held in the app for fiat currency and transfer it to a linked bank account. This process mostly occurs smoothly within the app, allowing users to cash out cryptocurrencies without complicated procedures.

The main advantage of these services is their user-friendly interface. Existing app users can easily access cryptocurrencies, greatly contributing to the popularization of the cryptocurrency market. It's also convenient to handle regular payments, transfers, and cryptocurrency transactions in one app. The high reliability of services provided by well-known companies is also a big advantage. The ability to easily purchase cryptocurrencies without using complex exchanges is helping to lower entry barriers for beginners.

However, these services also have some limitations. Most only support major cryptocurrencies, making it difficult to access various altcoins. Fees tend to be high in exchange for convenience, and advanced features are limited compared to exchanges.

Stripe, a fintech startup based on electronic payment processing (PG) established in 2010 and valued at $100 trillion, announced the reintroduction of cryptocurrency payments after 6 years. The company has grown rapidly since its establishment in 2010 to become a major payment infrastructure used by millions of businesses worldwide.

Stripe, which had discontinued cryptocurrency payments in 2018 due to Bitcoin's high volatility, now plans to support major blockchains like Solana, Ethereum, and Polygon using USDC stablecoin.

Furthermore, Stripe formed a strategic partnership with Coinbase in June 2024. The main content of the partnership is Stripe adding USDC on Coinbase's Base network to its cryptocurrency payment products. By adding Base USDC, it allows US customers to convert fiat currency to cryptocurrency faster. It also integrated Stripe's fiat-to-crypto on-ramp into Coinbase Wallet, allowing users to instantly purchase cryptocurrencies using credit cards and Apple Pay.

The use of the Base network brings significant improvements in transaction speed and cost, and this partnership aims for "sub-second, sub-penny" transactions, promising much more efficient transactions than existing financial systems. This shows the possibility of cryptocurrencies becoming an actual payment system beyond just an investment tool.
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3.5 Broker Services

Broker services provided by traditional investment platforms like Robinhood offer cryptocurrency trading options along with various financial products such as stocks, bonds, and foreign exchange. These services act as a gateway for existing investors to easily access the cryptocurrency market.

As an on-ramp function, users can purchase cryptocurrencies or cryptocurrency-related derivatives with funds deposited on the platform. In most cases, users trade derivatives linked to cryptocurrency prices rather than purchasing actual cryptocurrencies. This allows users to leverage the volatility of the cryptocurrency market without holding actual cryptocurrencies.

For off-ramp functionality, users can sell held cryptocurrencies or related products and exchange them for fiat currency. This process generally occurs within the user's account, and the exchanged funds can be withdrawn to a linked bank account.

The main advantage of broker services is the ability to trade various asset classes on one platform. It's easy to diversify portfolios by managing stocks, bonds, and cryptocurrencies simultaneously. They also provide interfaces that are easy for general investors to use, lowering entry barriers. The high level of safety due to oversight by financial regulatory authorities is also an advantage.

However, these services also have limitations. Since users trade derivatives rather than actual cryptocurrencies, they cannot directly own or use cryptocurrencies. Also, in many cases, it's impossible to transfer cryptocurrencies to external wallets, meaning users may not have true ownership. Additionally, often only major cryptocurrencies are available for trading, which may limit the range of choices.
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3.6 OTC (Over-The-Counter) Services

OTC services primarily provide on-ramp and off-ramp solutions for large-scale transactions. They mainly target institutional investors, high-net-worth individuals, and large-scale traders.

As an on-ramp function, investors can purchase large amounts of cryptocurrencies with fiat currency over the counter. This process typically occurs through direct negotiation, bypassing the exchange's public order book.

For off-ramp functionality, large amounts of cryptocurrencies can be exchanged for fiat currency over the counter. This also involves setting trading conditions through direct negotiation.

The main advantage of OTC trading is the ability to handle large-scale transactions without market impact. While buying or selling large amounts of cryptocurrencies on an exchange at once can significantly affect market prices, OTC trading can avoid this issue.

However, OTC services generally require high minimum transaction amounts, limiting accessibility for individual investors. There's also counterparty risk, necessitating transactions through trusted intermediaries.
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3.7 Specialized On-ramp/Off-ramp Service Providers

Specialized service providers like MoonPay and Simplex offer services focused on buying and selling cryptocurrencies. These are primarily integrated into other cryptocurrency-related services or wallets.

MoonPay is integrated into many cryptocurrency wallets and exchanges, including MetaMask, allowing users to purchase cryptocurrencies directly without a separate platform. This convenience has made MoonPay one of the main entry points for new users into the cryptocurrency market.

These companies allow users to easily purchase cryptocurrencies via credit card or bank transfer. This process is very simple, enabling even users unfamiliar with complex exchange usage to easily buy cryptocurrencies.

For off-ramp services, they allow users to exchange held cryptocurrencies for fiat currency and transfer to bank accounts. Naturally, most specialized services handle necessary KYC and AML procedures in this process to ensure regulatory compliance.

The main advantage of such services is ease of use. Users can simply buy or sell cryptocurrencies without navigating complex exchange interfaces. Many also support various coins and tokens through collaboration with multiple cryptocurrency projects.

However, this convenience comes at a cost. Generally, users must pay higher fees than directly using exchanges. Also, some services may have limitations on supported countries or payment methods, making them not accessible to all users.
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3.8 Hybrid Financial Services

스Hybrid financial services like Strike and Wirex combine traditional financial services with cryptocurrency services. They bridge the gap between existing financial systems and the new cryptocurrency ecosystem.

As an on-ramp function, users can easily purchase cryptocurrencies in conjunction with traditional financial services. For example, they can transfer funds directly from a linked bank account to buy cryptocurrencies.

For off-ramp functionality, cryptocurrencies can be exchanged for fiat currency to use traditional financial services. Some services provide debit cards based on cryptocurrency balances, allowing payments with cryptocurrencies in actual stores.

스트라이크(Strike)는 비트코인 라이트닝 네트워크를 활용한 결제 앱입니다. 사용자들은 스트라이크를 통해 비트코인을 법정화폐로 쉽게 교환할 수 있으며, 이를 일상적인 결제에 사용할 수 있습니다.

Strike is a payment app utilizing the Bitcoin Lightning Network. Users can easily exchange Bitcoin for fiat currency through Strike and use it for everyday payments.

It especially provides international remittance services, enabling fast and cheap transactions by utilizing the Bitcoin network. Senders can send their local currency, and recipients can receive in their local currency, allowing users to enjoy the benefits of cryptocurrencies without directly handling them.

The main advantage of these hybrid services is the ability to utilize the benefits of both traditional finance and cryptocurrencies. Users can enjoy the advantages of cryptocurrencies while using familiar banking services. They can also smoothly connect everyday financial activities with cryptocurrency use.

However, these services face difficulties in responding to complex regulatory environments. They must comply with regulations related to both traditional finance and cryptocurrencies, which may limit service provision. They must also prepare for new types of risks that may arise from combining the two areas.
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3.9 Credit Cards/Debit Cards

Credit cards/debit cards also provide on-ramp and off-ramp functions. As an on-ramp function, users can load cards with fiat currency or directly purchase cryptocurrencies. Some cards support various cryptocurrencies, allowing users to load cards with their preferred cryptocurrency.

With a cryptocurrency payment card, users can use held cryptocurrencies for actual payments or withdraw cash at ATMs. During payment, the card company exchanges cryptocurrencies for fiat currency in real-time and pays the merchant.

The main advantage of these cards is greatly increasing the practicality of cryptocurrencies. Users can use cryptocurrencies for everyday purchases without complicated procedures. Many cards also operate cashback or reward programs, providing additional benefits by offering staking of reward tokens.

However, these cards also have some disadvantages. Usage may be restricted by regional regulations, and the actual purchasing power may differ from expectations due to cryptocurrency price volatility. Also, if the blockchain network is unstable during cryptocurrency payment, immediate transactions may be difficult.

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4. Structure and Operating Principle of Cryptocurrency Payment Card Services

4.1 Cryptocurrency Payment Cards in the Form of Debit Cards

암호화폐 Most cryptocurrency payment cards adopt the debit card model. Debit cards operate by immediately deducting the amount from the linked account when the user makes a payment at a merchant. This concept is very similar to check cards widely used in Korea.

For a debit card to function normally, a bank account that can store funds is essential. In the case of cryptocurrencies, 'wallets' that can safely store and manage digital assets play this role. Therefore, cryptocurrency payment cards must be used in conjunction with a specific wallet.

Cryptocurrency debit cards have their own unique wallets, which are usually managed in a centralized form. Users fill the balance by linking their personal wallets to the card's custodial wallet for charging (transfer). The reason it's not decentralized is that the off-ramp process, converting cryptocurrency to fiat currency, is necessarily required.
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4.2 Operating Process of Cryptocurrency Payment Cards

암호화폐 결제카드의 작동 프로세스는 카드로 결제를 하면, 카드 발행사는 사용자의 암호화폐 지갑에서 해당 금액만큼의 암호화폐를 실시간으로 법정화폐로 환전하고, 법정화폐로 가맹점에 대금을 지불하는 방식으로 작동합니다. 구체적인 과정을 살펴보면,The operating process of cryptocurrency payment cards works as follows: When a payment is made with the card, the card issuer instantly exchanges the corresponding amount of cryptocurrency from the user's wallet for fiat currency and pays the merchant in fiat currency. Looking at the specific process:

First, the user attempts to make a payment using the card at a merchant. At this point, the card terminal sends an approval request to the card issuer through the existing card network (Visa, Mastercard, etc.). The card issuer checks the balance of the user's cryptocurrency wallet and approves if there is sufficient balance.

Once approved, the card issuer immediately exchanges the necessary amount of cryptocurrency for fiat currency. This exchange process usually takes place through a cryptocurrency exchange partnered with the card issuer. One reason why cryptocurrency exchanges like Coinbase or Crypto.com issue their own cards is that they can handle this exchange process smoothly.

The exchanged fiat currency is transferred to the merchant through the existing card network. From the merchant's perspective, there is no difference between a cryptocurrency payment card and a regular card. They simply receive the card payment and receive the payment in fiat currency as usual.

If we divide this into on-chain and off-chain, first, the process of moving cryptocurrency from the user's wallet to the card issuer's wallet occurs as an on-chain transaction. This transaction is recorded on the blockchain network and can be verified by anyone. On the other hand, the internal exchange process by the card issuer or the payment process to the merchant occurs off-chain. This part operates similarly to existing card payment systems and is not directly recorded on the blockchain.

A notable point in this process is the real-time exchange mechanism. The exchange process must be very fast and accurate at the same time. Most cryptocurrency payment cards determine the optimal exchange rate through their own algorithms. These algorithms monitor the rates of various exchanges in real-time and select the most favorable exchange rate.
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4.3 Reward (Cashback) System of Cryptocurrency Payment Cards

Many cryptocurrency payment cards operate various reward programs. The most common form is providing cashback in cryptocurrency for a certain percentage of the payment amount. The cryptocurrency provided as cashback can be major cryptocurrencies or the card company's own tokens.

There are several strategic reasons why cryptocurrency payment card companies create their own tokens to provide as rewards. First, from a cost perspective, issuing their own tokens is much more economical than providing rewards in cash or other cryptocurrencies. This can greatly help in reducing the company's operating costs.

Moreover, their own tokens play an important role in building and strengthening the company's ecosystem. Users continue to use the platform to earn more tokens, leading to improved user loyalty. From the company's perspective, this allows them to secure a stable user base.

Some cards operate a tier system based on the payment amount and provide additional benefits to users of higher tiers. These reward systems serve to encourage card usage and increase participation in the cryptocurrency ecosystem.

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5. Analysis of Major Cryptocurrency Payment Card Cases

Currently, there are over 60 types of cryptocurrency payment cards in the market, all of which are debit or prepaid cards using Visa and Mastercard networks. Most are usable in Europe or the United States, with off-ramp costs and cashback varying slightly by card.

Cards can also be distinguished by whether the connected wallet is custodial or non-custodial. The Bybit and Ledger CL cards introduced below are connected to custodial wallets, while Cyphers is connected to a non-custodial wallet.
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5.1 Bybit Crypto Debit Card

바이비트(Bybit)는 2018년 설립된 암호화폐 현물/파생상품 거래소로 국내에서도 인지도가 높은 거래소입니다. 특히 바이비트는 VIP 프로그램과 직불 카드 혜택을 연결하여 제공하고 있는데요.

VIP는 Bybit, established in 2018, is a cryptocurrency spot/derivatives exchange with high recognition in Korea. Bybit particularly connects VIP program benefits with debit card benefits.

VIPs receive not only cashback as a percentage of the payment amount but also additional benefits such as margin ratios and reward points according to their tier. Notably, for the highest grade, VIP Supreme, the cashback rate is 10%, which is extremely high compared to other cards. For example, if you pay 10 million won with a cryptocurrency debit card, you can receive cryptocurrency equivalent to 1 million won as a reward.

Also, when paying with a Bybit card for affiliated trading service providers (TradingView, 3Commas) or Telegram Premium and X (formerly Twitter) Blue services, 100% discount is supported.
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5.2 Ledger CL Crypto Debit Card

Ledger, a leader in the global hardware wallet field, launched the 'Crypto Life' (CL) card platform in 2022 in collaboration with Baanx. Although not launched by Ledger alone, it's called "CL card serviced by Ledger" due to the following collaboration structure. While Ledger's technology and security are key, the actual service is provided separately with partner companies:

• Frozen Time Unipessoal LDA: Registered with the Bank of Portugal to provide cryptocurrency asset services.
• Baanx.com Ltd: A partner company approved by the UK Financial Conduct Authority (FCA) to provide cryptocurrency asset services.
• Ledger: The CL card is integrated into Ledger's ecosystem and security principles, allowing Ledger users to access the Crypto Life platform and its functions.

One feature of the CL card is its ability to integrate with Ledger wallets. Users can link cryptocurrencies stored in their Ledger wallet to the card for real-time payments.

A Ledger wallet is not necessarily required to use the CL card. The wallet provided by the CL card is basically a custodial wallet unlike the Ledger wallet, and once transferred from the Ledger wallet to the CL card wallet, it's stored through a custodial wallet.

Like other cryptocurrency payment cards, the CL card provides a cashback service. Cashback is 1% when received in BTC and USDT, and 2% when received in BXX, the native token of Baanx, one of CL card's business partners. As the platform also provides staking of BXX tokens, it naturally leads to a cashback → staking asset lock-in effect.

The CL card also offers lending services called Crypto Draft and Stable Loan on the platform. Crypto Draft is a service that allows borrowing up to 60% of the funds stored on the card. It can be used without interest if the LTV is maintained below 10%. On the other hand, Stable Loan is a product that allows borrowing with fixed interest rates for periods set by the platform (6/12/18/24 months).
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5.3 Cypher's Crypto Prepaid Card

Cypher is a decentralized wallet service established in 2021. Cypher is famous for receiving $4.3 million in seed investment under the lead of legendary startup accelerator Y Combinator. It provides a blockchain wallet like MetaMask as an extension/app, and also services a cryptocurrency prepaid card connected to the wallet.

Cypher basically provides a multi-chain wallet and offers users a prepaid card connected to that wallet. Unlike the Bybit or CL card explained earlier, this wallet is a non-custodial wallet, meaning only users who fully own the private key can access it. Similarly, only users can access the funds loaded on the card.

Currently, Cypher doesn't provide cashback unlike other cryptocurrency debit cards, but plans to launch a cashback program from Q3 2024. They also announced plans to develop various dApps as well as staking connected to the wallet. In the future, users will be able to manage their asset portfolio including prepaid cards, swap/bridge/staking through a dashboard in Cypher's wallet.

Cypher also provides corporate card services that can be used by corporations in addition to consumer cards. The corporate card is a product provided to companies that have completed KYB, and plans to provide not only payment but also a dashboard service for expense management. If employees are spread around the world and individual employees need to be provided with corporate cards, Cypher's card seems to be the most useful product.

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6. Visa and Mastercard's Entry into the Cryptocurrency Market and Their Strategies

Visa and Mastercard, two giant payment network companies, are causing a significant stir in the industry as they fully enter the cryptocurrency market. There are several strategic reasons for Visa and Mastercard to adopt blockchain technology and develop cryptocurrency payment cards.

First, both companies are actively moving to take the lead in the rapidly growing cryptocurrency market. Expecting blockchain and cryptocurrencies to become an important part of future finance, they are aiming to secure a competitive advantage by preemptively developing technology and services in this field.

Additionally, they can gain additional revenue through new business models such as fees related to cryptocurrency transactions and profits from issuing and using cryptocurrency payment cards. They can also create synergy effects with existing businesses. By integrating blockchain technology into existing payment systems, faster and safer transaction processing becomes possible, improving customer satisfaction and operational efficiency.

Providing services targeting the MZ and Alpha generations who are highly interested in cryptocurrencies is also an important goal for Visa and Mastercard to preemptively secure future main customer bases. Especially, wouldn't cryptocurrencies be an attractive payment method for young customers looking to purchase electric vehicles like Tesla or innovative IT products?

Moreover, through blockchain and cryptocurrency technology, they can provide financial services to those excluded from the existing financial system, increasing financial inclusion.

Lastly, by directly participating in the cryptocurrency market, they can secure a position to reflect their interests when future regulations in this field are created. This can be seen as a very important strategic move from a long-term perspective.

The movements of these two companies are expected to play an important role in popularizing cryptocurrencies and increasing their practicality in terms of accessibility. Let's take a detailed look at each company's strategy and current progress.
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6.1 Visa's Cryptocurrency Strategy

Visa is showing a very aggressive stance in entering the cryptocurrency market. They started expanding cryptocurrency-related services in earnest from 2021, with the following main contents:

6.1.1 Launching Debit Cards with Major Crypto Partners

Visa is leading the market by partnering with major cryptocurrency companies and launching crypto debit cards. This is an important advancement that allows cryptocurrency holders to easily use their digital assets in everyday purchases.

As mentioned earlier, they have launched cards with Coinbase, the largest cryptocurrency exchange in the US, Binance, the world's largest cryptocurrency exchange, and Crypto.com, a cryptocurrency exchange aiming to build a payment system using cryptocurrencies (digital assets). (Binance terminated its card service as of December 2023)

They also have a reference of issuing cryptocurrency debit and prepaid cards usable in over 40 countries through a partnership with Wirex, a global digital payment platform.

Through these partnerships, Visa is providing convenient payment methods to cryptocurrency users while greatly increasing the practicality of cryptocurrencies by utilizing its existing Visa merchant network.

6.1.2 Fast Track Fintech Program

Visa operates a 'Fintech Fast Track' program that supports fintech and cryptocurrency companies in quickly launching new payment solutions to the market. This program aims to create the future of payments together by connecting Visa's global payment network with innovative startups.

Visa's Fintech Fast Track program offers various benefits to participating companies. First, they can greatly reduce costs by utilizing Visa's world-class marketing solutions and expertise in risk and fraud prevention. This allows companies to develop strategies, manage portfolios, and launch products more efficiently.

Also, the onboarding process and PoC program review and preparation process are accelerated by leveraging relationships with various Visa partners such as BIN sponsors and processors.

Participating companies can also enjoy various cohort benefits including exclusive resources, free trials of selected solutions, and preferential terms with Visa's recommended partner network. Furthermore, they gain access to Visa's vast global network of 4.1 billion cards, over 200 countries and regions, $14.1 trillion in total transaction volume, and over 80 million merchants.

The program's approval process consists of application, review, approval, and market entry stages, with professional support from Visa available at each stage. Through this process, participating companies can introduce innovative payment solutions to the market more quickly and effectively.

6.1.3 Supporting Stablecoin Payments Using Ethereum and Solana

Visa is also putting effort into developing payment systems that directly utilize blockchain technology. In particular, the payment system using USDC through partnership with Circle is drawing attention as a solution that can solve the volatility problem of cryptocurrencies while leveraging the advantages of blockchain.

• Ethereum-based USDC Payments: In March 2021, Visa experimentally operated a payment system using USD Coin (USDC) stablecoin in collaboration with the cryptocurrency payment platform Crypto.com. This case was the first to allow direct stablecoin payments on the Visa network, enabling more efficient payments by skipping the existing fiat currency conversion process.
• Solana-based USDC Payments: Visa is also pursuing collaboration with the Solana blockchain, which is gaining attention for its high-speed, low-cost transactions. Solana's fast processing speed and low fees are suitable for real-time payments and are expected to create synergy with Visa's global payment network.

These efforts show Visa's willingness to integrate blockchain technology itself into the payment infrastructure, beyond simply converting cryptocurrencies to fiat currencies.

6.1.4 Account Abstraction (AA) and Paymaster Experiment

Visa is further experimenting with applying the latest trends in blockchain technology to its payment services. In simple terms, it allows users to pay transaction fees on general blockchain networks with a Visa card using the paymaster function of account abstraction.

• Applying Account Abstraction: Account abstraction is a technology that can greatly improve user experience, and Visa aims to build a more intuitive and secure cryptocurrency payment system through this. With this technology, users will be able to use cryptocurrencies easily without managing complex wallet addresses or private keys.
• Introducing Paymaster: Paymaster is a system that pays transaction fees on behalf of users, and Visa intends to allow users to use blockchain-based services without holding cryptocurrencies. This is an innovative approach that can greatly lower the complexity of use, one of the major barriers to cryptocurrency popularization.

These experiments show that Visa is not simply following current cryptocurrency trends, but actively envisioning and preparing for future payment systems.

6.1.5 Introduction of Off-ramp Solution through Visa Direct

Visa is also opening new possibilities for cryptocurrency users by introducing an innovative off-ramp solution. Through a partnership with Transak, a Web3 infrastructure provider, Visa has built a cryptocurrency withdrawal and payment system using the 'Visa Direct' solution. This can be called a groundbreaking service that allows easy conversion of cryptocurrencies to fiat currencies without going through centralized exchanges.

The biggest feature of this new system is user convenience and wide application range. Users can now directly withdraw assets held in various cryptocurrency wallets such as MetaMask, Trust Wallet, and Coinbase Wallet to Visa debit cards. Additionally, it supports over 40 major cryptocurrencies including Bitcoin, Ethereum, Solana, and Dogecoin, broadening users' choices.

The operating principle of Visa Direct is simple yet efficient. When a user requests a withdrawal from a cryptocurrency wallet, the Visa Direct system checks the real-time exchange rate of that cryptocurrency. It then exchanges the cryptocurrency to fiat currency at the confirmed rate and immediately transfers the exchanged amount to the user's Visa debit card. This entire process is completed within 30 minutes, providing users with a fast and convenient service.

With the introduction of this service, users can now immediately use their digital assets in real life without going through cryptocurrency exchanges. Payments using cryptocurrencies have become possible at over 130 million Visa merchant locations worldwide, and the service is available in more than 145 countries, including Korea.

Visa's move is expected to be an important milestone in narrowing the gap between cryptocurrencies and traditional financial systems. Consequently, it is expected to greatly increase the practicality of cryptocurrencies and accelerate the popularization of cryptocurrencies by enabling more people to use digital assets in everyday transactions.
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6.2 Mastercard's Cryptocurrency Strategy

Mastercard, like Visa, is also showing an active stance in entering the cryptocurrency market. While pursuing similar strategies to Visa, it is taking some unique approaches.

6.2.1 Crypto Card Program

Mastercard, like Visa, has introduced cryptocurrency payment cards usable on the Mastercard network in collaboration with various crypto platforms.

Types include cryptocurrency debit cards, credit cards that can be used based on cryptocurrency holdings without selling cryptocurrencies, and credit cards that can receive rewards in cryptocurrencies.

Through this program, Mastercard is supporting crypto partners to enable cryptocurrency payments at Mastercard merchants spread around the world. Of course, card issuance and use are tailored to local regulations. In many markets, crypto partners collaborate with financial institutions to issue cards, and Mastercard is helping crypto partners launch their own branded solutions.

6.2.2 Multi-Token Network (MTN)

In 2023, Mastercard launched the Multi-Token Network (MTN), a blockchain-based app store "designed to make transactions within digital asset and blockchain ecosystems secure, scalable, and interoperable" to increase the efficiency of payment and commerce applications and allow financial institutions to use permissionless networks more safely.

The core of MTN is a system that maintains the stability of existing financial systems while making blockchain technology usable by more people. Mastercard aims to build a security-enhanced network composed of carefully selected, trustworthy participants based on existing blockchain technology.

Simply put, it means leaving existing blockchain systems as they are and creating a special network on top of them where only safe and reliable people participate. This allows for safer and more reliable transactions while maintaining the advantages of the existing system.

Through MTN, Mastercard aims to solve four major problems: whether the counterparty can be trusted, whether the value of digital currency can be trusted, whether different networks connect well with each other, and whether there are clear rules.

Mastercard started testing a beta version of the network in the UK in the third quarter of 2023 and plans to serve as a testbed for developing live pilot applications and use cases with financial institutions, fintech companies, and central banks. Mastercard has stated that it plans to make MTN available in other countries around the world in the future.

6.2.3 Mastercard's Start Path Crypto

Mastercard is selecting and supporting promising blockchain and cryptocurrency startups through its 'Start Path Crypto' program. Through this, it is leading the discovery of innovative technologies and services.

Since the program's establishment in 2014, Mastercard has supported over 400 startups from 54 countries. Start Path Crypto provides support similar to general accelerators (AC), but also offers opportunities to collaborate with Mastercard through PoC in actual payment or card services.

Selected startups receive special training and mentorship for four months, and gain opportunities to access Mastercard's customer and channel networks.

6.2.4 Mastercard Engage Partners Network

Mastercard's Engage Partners Network is a support program that allows partners to easily collaborate with Mastercard. Specifically, it provides access to Mastercard's technology and APIs, opportunities to utilize global networks and customer bases, technical support and consulting, joint marketing and business development, and collaboration with other innovative companies. In 2022 alone, over 150 partners used Mastercard products and services to deploy innovative solutions to more than 500 million accounts for customers.

Recently, a crypto track has been added to this program, and the program is actively progressing in the cryptocurrency and blockchain technology fields. Through this program, Mastercard is pursuing innovation in areas such as cryptocurrency payment card issuance, digital asset management, and blockchain-based payment solutions.

Eligible participants include issuers or BIN sponsors wishing to launch new cryptocurrency card programs, payment ecosystem facilitators seeking to expand cryptocurrency payment solutions with BIN sponsors, Virtual Asset Service Providers (VASPs), and processors.

The roles of partner companies can be briefly summarized as follows. Currently, companies participating in this program include Baanx, episodeSix, Immersve, monavate, Moorwand, PayCaddy, paymentology, pomelo, and Unlimit, among others.

• Card Issuer or BIN Sponsor:
  
  • Issuer: Refers to financial institutions that can directly issue cards. Typically, this includes banks or credit card companies.
  • BIN Sponsor: An institution that owns a Bank Identification Number (BIN) and allows other companies to issue cards using their BIN.
  Payment Ecosystem Facilitator:
  • These are companies that support payment systems but don't directly issue cards.
  • For example, this could include payment gateway providers, payment processing companies, and financial software development firms.
  Virtual Asset Service Provider (VASP):
  • This refers to companies providing cryptocurrency-related services such as cryptocurrency exchanges, wallet providers, and cryptocurrency custody services.
  • They provide the infrastructure to enable the use of cryptocurrencies in actual payments.
  Acquirer/Payment Processor:
  • These handle the processes of authorization, settlement, and billing for card transactions.
  • They play a role in processing and mediating transaction information between card issuers and merchants.

6.2.5 Innovating Cryptocurrency Transactions with Crypto Credentials: Launching P2P Pilot Transactions and Expanding New Partnerships

Mastercard is opening new horizons for cryptocurrency transactions through its Crypto Credential system. This innovative system allows sending and receiving cryptocurrencies using Mastercard Crypto Credential aliases instead of complex blockchain addresses.

Mastercard has implemented features for simple and secure blockchain transactions between Latin America and Europe in collaboration with exchanges such as Bit2Me, Lirium, and Mercado Bitcoin. This enables users in Argentina, Brazil, Chile, France, Guatemala, Mexico, Panama, Paraguay, Peru, Portugal, Spain, Switzerland, and Uruguay to make cross-border and domestic remittances across multiple currencies and blockchains.

The operating principle of Crypto Credentials is as follows: First, the exchange authenticates users according to Mastercard's Crypto Credential standards. Authenticated users receive an alias that can be used to send and receive funds on all supported exchanges. When a user initiates a transfer, the Crypto Credential verifies if the recipient's alias is valid and if the recipient's wallet supports the relevant digital asset and blockchain. If the receiving wallet doesn't support the asset or blockchain, the sender is notified and the transaction doesn't proceed, preventing fund loss for all parties.

The main advantage of this system is that users can transact without needing to know which assets or chains the recipient's wallet supports, thanks to metadata exchange. It also supports Travel Rule information exchange for cross-border transactions, meeting regulatory requirements.

This real-world application of Crypto Credentials is the first case of realizing Mastercard's vision unveiled at Consensus 2023. This case shows the potential to further expand and support domestic and cross-border remittance markets. Going forward, selected cryptocurrency wallet users will utilize Crypto Credentials on a first-come, first-served basis, and it's expected to be more widely available to over 7 million users of participating exchanges in the coming months.

Mastercard's innovation is expected to greatly enhance the convenience and security of cryptocurrency transactions and be an important milestone in accelerating the practical application of blockchain technology. P2P transactions are just the first of many potential use cases that Crypto Credentials aim to support, and it's expected to expand to NFTs, ticketing, and other payment solutions depending on market and compliance requirements.
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6.3 CBDC Solutions of Visa and Mastercard

6.3.1 Visa's CBDC Solution

Finally, both Visa and Mastercard are actively involved in CBDC platforms. Visa is already testing Central Bank Digital Currencies (CBDCs) in collaboration with several central banks.

Specifically, it's participating in the Hong Kong Monetary Authority (HKMA)'s e-HKD pilot program along with HSBC and Hang Seng Bank to study and test use cases and explore the possibilities of digital payments for tokenized deposits.

It's also participating in the Central Bank of Brazil's digital real pilot, and has previously collaborated with the Central Bank of Brazil on a project to design a functional prototype based on a blockchain hub that allows Brazilian SMEs to transfer funds instantly through the CBDC ledger.

6.3.2 Mastercard's CBDC Solution

Like Visa, Mastercard is participating in several CBDC projects. Mastercard created the CBDC Partner Program to help "better understand the advantages and limitations of CBDCs and how to implement them in a safe, smooth, and useful way." This program is designed to encourage collaboration with blockchain technology and payment service providers to promote innovation and efficiency.

In addition to Brazil and Hong Kong, Mastercard is participating in the Reserve Bank of Australia's pilot project to explore potential use cases for an Australian CBDC to provide payment and settlement services to households and businesses. As part of this pilot project, Mastercard demonstrated solutions that can tokenize interoperable CBDCs or wrap them on other blockchains for use in Web 3.0 commerce.

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7. Problems Solved by Cryptocurrency Payment Cards and Their Future

7.1 Structure of the Existing Card Payment Ecosystem

The existing card payment market consists of various stakeholders. These include general consumers, merchants, acquirers/processors, card network companies, card issuers (processors), ISOs that act as agents for merchant recruitment and POS installation, and companies providing merchant software or SaaS. In this ecosystem, multiple stakeholders are intertwined in a single process from consumer card issuance to use at merchants, payment authorization, clearing, and fee distribution. Due to this complex structure, it takes considerable time from payment to settlement/payment of funds. In Korea, a three-party model is adopted where credit card companies combine the roles of network, issuer, and acquirer. Although there are slight differences from the U.S. model, it essentially has a similar structure.

Cryptocurrency payment cards process some parts of the payment and settlement process on the blockchain. Theoretically, this can reduce intermediate payment steps, increase transaction transparency, and significantly improve processing speed. However, most cryptocurrency payment cards still use the existing card network companies' computer networks such as Visa and Mastercard, so not all processes can be handled on-chain.

Nevertheless, cryptocurrency payment cards have the potential to partially resolve the inefficiencies of existing card payment systems and provide faster and more economical payment solutions.
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7.2 Problems Solved by Cryptocurrency Payment Cards

7.2.1 Innovative Solution for Consumers' Daily Spending

Cryptocurrency payment cards are innovative financial tools that provide various benefits to both general card users and merchants. Let's first think from the perspective of general users who hold cryptocurrencies. They had a desire to use cryptocurrencies not just for trading but also for everyday spending. However, this process was very complicated and time-consuming using existing methods.

In the traditional method, several steps had to be taken to purchase goods using cryptocurrency. First, you had to exchange cryptocurrency for fiat currency at an exchange, transfer it to an external bank account, and then wait for the transfer to complete before making an actual purchase. This process was very cumbersome and time-consuming.

Cryptocurrency payment cards, which emerged to address these inconveniences, offer several advantages. The biggest feature is that you can use your held cryptocurrencies immediately without going through complicated exchange processes.

Users can use this card at most merchants worldwide using the Visa or Mastercard network. It also supports not only major cryptocurrencies like Bitcoin and Ethereum but also various altcoins, allowing users to manage and use multiple types of cryptocurrencies they hold with a single card.

7.2.2 Reducing Merchant Fees Compared to Existing Card Networks

Cryptocurrency payment cards have the potential to offer significant advantages in terms of fees compared to traditional credit or debit cards. Credit card processing fees are costs that businesses pay to authorize and complete card transactions, and in both the U.S. and Korea, these are borne by merchants. This Merchant Discount Fee (MDF) is largely composed of three parts:

The settlement fee (interchange fee) is paid to the card-issuing bank and accounts for the largest portion of the total fee. It's basically set at 1.51% + $0.10 but is differentiated according to the type of card (credit or debit) and the size of the issuing bank. As the transaction amount increases, its proportion in the total fee increases. The settlement fee is a non-negotiable item and is paid to issuing banks such as Chase, Citi, and Bank of America.

The network fee (assessment fee) is charged by card network companies like Visa, Mastercard, and American Express for each transaction. This fee is applied at the same rate to all processors and, like the settlement fee, is non-negotiable. The network fee is used to cover the operating costs of the card network and is set directly by the card network.

The acquisition/processing fee is the share taken by the payment processor. This fee is the remaining amount after deducting the settlement fee and network fee, and is paid to payment processors such as Square, Stax, and Helcim. Larger merchants can negotiate this fee rate more favorably.

In summary, in traditional card payment systems, the fees borne by merchants are quite high. Generally, for credit or debit cards, merchants have to pay fees between 1.5% and 3.5% of the transaction amount. Especially when using cards overseas, these fees can be even higher, sometimes soaring up to 5%.

Cryptocurrency payment cards present the possibility of simplifying this structure and reducing costs. By utilizing blockchain technology, they can reduce intermediate steps and streamline the transaction processing process, potentially lowering overall fees. However, it's noteworthy that most cryptocurrency payment cards are still using existing card networks like Visa or Mastercard.

This aspect can be a limiting factor for complete fee reduction. As long as existing card networks are used, it will be difficult to completely avoid network fees.

Additionally, the volatility of cryptocurrencies and the spread (difference between buy and sell prices) that occurs during real-time exchange are factors to consider. These factors may potentially act as additional costs to merchants.

Therefore, it's not yet certain whether cryptocurrency payment cards can dramatically lower merchant fees. Whether the current low-fee model will be sustainable in the long term, and how to reduce dependence on existing card networks will be challenges going forward.

Nevertheless, cryptocurrency payment cards are presenting a new approach to the issue of merchant fees. Depending on future technological advancements and changes in the regulatory environment, it remains to be seen whether this system can substantially contribute to reducing merchant fees. If a completely decentralized payment system is implemented, it could be an innovative solution to the issue of merchant fees.

7.2.3 Settlement Delays and Instant Settlement

The general card payment process consists of three main stages: authorization, clearing, and settlement.

1. Authorization: This is the process where the card issuing institution allows the collection of the sale amount. The card issuer checks for fraudulent use and verifies the cardholder's credit limit to decide on authorization.

2. Clearing: This is the process of exchanging authorized transaction information and calculating the amount to be settled. It proceeds as follows:

• The acquirer sends the card transaction information received from the merchant to the MAS (Merchant Accounting System) where the merchant's account is.
• The MAS forwards this information to networks like Visa or Mastercard.
• The network company organizes the transaction information and calculates the amounts to be paid or received by each participating institution (issuer, acquirer, merchant).

3. Settlement: This is the process of actually transferring the amounts calculated in the clearing stage:

• The MAS sends the information about the amount to be deposited to the merchant, excluding the acquirer's fee, to the ACH (Automated Clearing House) network.
• Funds are transferred from the issuer to the acquirer, and from the acquirer to the merchant through the ACH network.
• The merchant finally receives the sales amount.

In such traditional card payment systems, the clearing and settlement stages are usually batch processed at T+3 days, placing a considerable burden on the business's cash flow. This delay can cause difficulties in inventory management, payroll, and securing operating funds, especially for small businesses or industries where cash flow is critical. In Korea, while card settlement for merchants is completed within 2-3 business days from the payment date, there can be a 1-2 day difference depending on the scheduled deposit date. Also, the sales settlement period differs by card company.

On the other hand, cryptocurrency payment cards theoretically enable near real-time settlement using blockchain technology. Especially for payments using Layer 2 solutions like the Lightning Network, transactions are confirmed within seconds. This can provide various benefits to businesses such as improved cash flow, efficient inventory management, reduced financial costs, and quick response to new business opportunities.

However, most cryptocurrency payment cards currently in the market still use the existing card network's payment processing system, so they have to follow the traditional card payment process to some extent.

Additionally, the process of converting cryptocurrency to fiat currency and delivering the payment to merchants can add more complexity and time in the backend. Given the characteristics of cryptocurrencies, processing for compliance with anti-money laundering and counter-terrorism financing regulations may also be necessary.

Nevertheless, cryptocurrency payment card systems are likely to provide faster settlement than existing systems. Due to the nature of cryptocurrency transactions, the initial authorization process can be faster, and some processing steps can be optimized using blockchain technology. Also, some cryptocurrency payment card providers may offer faster settlement options to merchants. For example, they could operate by prepaying the payment amount for a certain period and later receiving the payment from the card network.

In conclusion, while cryptocurrency payment cards using Visa or Mastercard networks may not achieve complete instant settlement, they have the potential to provide faster settlement than existing systems.
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7.3 Prospects and Development Direction of Cryptocurrency Payment Cards

7.3.1 Outlook for Existing Cryptocurrency Payment Cards

The cryptocurrency payment card market is growing rapidly, and many changes and developments are expected in the future. Various factors such as technological innovation, market expansion, and changes in the regulatory environment are likely to determine the future of this market.

First, looking at technological innovation, the development of blockchain technology is expected to greatly improve the performance of cryptocurrency payment cards. In particular, various attempts are being made to solve transaction speed and fee issues. For example, the introduction of Layer 2 solutions like the Lightning Network could speed up transaction processing and lower fees.

Also, more complex financial services utilizing smart contract technology are likely to be integrated into cryptocurrency payment cards. For example, functions such as automatically swapping rewards for card use into other cryptocurrencies, or automatic payments when certain conditions are met, could be added.

In terms of market expansion, more traditional financial institutions are expected to enter the cryptocurrency payment card market. While Visa and Mastercard are already actively participating in this market, large banks are also likely to launch their own cryptocurrency payment cards in the future. This can ultimately contribute to promoting market competition and improving service quality.

The use cases for cryptocurrency payment cards are also expected to expand. While they are currently mainly used for payments in offline stores, they are likely to expand into various areas such as online shopping, utility bill payments, and salary payments in the future. Especially if global e-commerce platforms like Amazon actively accept cryptocurrency payment cards, the market could grow explosively.

Diversification of financial services linked to cryptocurrency payment cards is also expected. They are likely to develop in the direction of providing comprehensive financial services beyond simple payment functions, including savings, investment, and loans. Through this, cryptocurrency payment cards could evolve beyond simple payment methods into comprehensive digital asset management platforms.

7.3.2 Possibilities and Challenges of Decentralized Cryptocurrency Cards

앞서 언급한 기존의 인프라를 배제한 탈중앙화 암호화폐 결제카드가 나타날 가능성도 있습니다. 이러한 모델은 기존 카드 네트워크 대신 퍼블릭 블록체인을 이용하여 거래의 검증과 기록을 분산화하고, 더 투명하고 안전한 카드 결제 시스템을 구축할 수 있There is also the possibility of decentralized cryptocurrency payment cards that exclude the existing infrastructure mentioned earlier. This model can use public blockchains instead of existing card networks to decentralize transaction verification and recording, building a more transparent and secure card payment system. Also, if merchants receive payments in cryptocurrency instead of fiat currency, the off-ramp process can be eliminated, making the service more cost-effective. Of course, it would be necessary to receive payments in stablecoins to lower the volatility of the payments and save on exchange fees.

Using smart contracts in this structure can automate the payment authorization, clearing, and settlement processes, and without intermediaries, completely P2P transactions become possible. By utilizing the characteristics of blockchain, near real-time settlement can be achieved, improving cash flow as merchants can receive payments immediately after the transaction. Also, as a single payment system that transcends borders, there are no additional costs for overseas payments, and the simplification of the exchange process reduces costs.

Personal information protection can be enhanced by utilizing the anonymity of blockchain, and it's possible to apply zero-knowledge proof technology that selectively discloses only necessary information. Smart contracts can provide various payment options such as conditional payments and automatic split payments, and by linking with blockchain-based distributed identity systems, a safer and more convenient authentication system can be built.

However, there are several challenges to overcome for this innovative model to be realized. Basically, blockchain networks are not efficient for payments and can degrade user convenience, so Layer 2 solutions like the Lightning Network or partially centralized models are likely to be needed to solve this. Also, very difficult challenges need to be solved, from compatibility issues with existing payment infrastructure to resolving stakeholder issues, regulatory response, user education for popularization, and improving user experience.

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8. Conclusion

Cryptocurrency payment cards are innovating the existing complex card payment system using blockchain technology. They can offer many advantages such as simplifying the payment process, improving processing speed, and increasing transaction transparency.

However, cryptocurrency payment cards are still focused on user convenience rather than merchant benefits. As they utilize existing card networks, they haven't been able to effectively lower merchant fees or provide instant settlement.

Also, in the modern payment environment where mobile and simple payments using easy payment methods, NFC, QR codes, etc. are increasing, questions may be raised about the necessity of the 'card' form.

The main reasons for the current launch of cryptocurrency payment cards include user familiarity, infrastructure compatibility, offline usability, and compliance with existing financial regulatory frameworks. Many people are still accustomed to card-type payment methods, and compatibility with globally established card payment systems can reduce the burden on merchants to adopt new systems. It also serves as an alternative that can be used in situations where smartphone batteries are drained or internet connection is unstable.

In the long term, cryptocurrency payment systems may evolve in a more innovative direction beyond the 'card' form. Integrated mobile wallets that can store and pay with both fiat and cryptocurrencies might emerge.

In conclusion, current cryptocurrency payment cards can be seen as a transitional form for compatibility with existing systems and user familiarity. In the future, more innovative and diverse forms of cryptocurrency payment systems are likely to emerge as technology advances and user habits change.

These changes will play a crucial role in bridging traditional financial systems and the new digital economy, becoming a key element in shaping the future of finance. The evolution of cryptocurrency payment systems will have far-reaching impacts beyond mere technological innovation, including increasing financial inclusion, building borderless payment systems, and creating a more efficient and transparent financial ecosystem.