Forward the Original Title‘Let’s talk about Crypto Card (U card) in depth. What exactly is the U card that many project parties have started to make?’

Many project parties have begun to develop Crypto Card (U card), because Crypto Card directly solves the biggest pain point in the currency circle: withdrawal, that is, converting crypto back to fiat currency.

Since cashing out can easily involve receiving illegal funds, this process frequently results in frozen cards. Cashing out is more difficult than depositing funds, with higher friction, and some stable, reliable cash-out channels typically charge fees of around 6%.

However, with the emergence of Crypto Cards, the problem of small-amount withdrawals for crypto users has been directly solved. These cards can be linked to third-party payment channels (such as WeChat & Alipay) for daily expenses, and in China, they are treated as normal foreign currency cards.

Let’s take a closer look at how U Cards actually work.

1. What Exactly Is A Crypto Card?

Crypto Card is essentially a prepaid card. The card issuer has a bank account with Visa/MasterCard. The user transfers the stable currency to the card issuer, and the card issuer will allocate a payment limit to your card.

The U card is similar to the recharge card issued by supermarkets. It can only be used for payment and cannot be transferred. There is actually no legal currency balance in this card.

The Crypto Card business is a centralized model. Users transfer stable coins to the platform, and the platform gives you a card limit. When the funds accumulated by the platform are large enough, the platform will have great motivation to directly withdraw the funds and run away.

Issuing a card is not a very difficult task. In fact, there are already many card issuance intermediaries that can realize “one-click card issuance”.

The role of the card issuance intermediary is to help companies connect with card organizations, make all preparations before card issuance, and then the project side can issue the card.

This is the biggest advantage of card issuance intermediaries: they control the channels for connecting with card organizations, requiring strong qualifications to do this.

Additionally, card issuance intermediaries control consumption data, so all risk control related to bank cards is handled by them. They directly manage issues related to card freezing and cancellation.

We can see that various Crypto Cards are actually issued through these intermediaries. Their core business lies in building brands and channels, essentially converting traffic into business.

The card issuer’s commercial revenue mainly consists of two parts: card issuance fees and exchange fees, and returns from fund operations.

The funds are divided into three parts: asset custody (liquid funds to handle user withdrawals), interest-generating assets (assets for generating returns, placed in CeFi or DeFi), and advance payments (sent to card issuance intermediaries in exchange for actual fiat currency limits).

In summary, the Crypto Card market is highly homogeneous, and various cards we see may be operated by the same card issuance intermediaries.

Therefore, at this point, choosing a Crypto Card issued by a large platform is very important, as it can significantly reduce the risk of exit scams.

2. Market Gap

The first U Card to become popular was the OneKey Card.

OneKey’s main business is hardware wallets, and it later entered the Crypto Card business field.

OneKey itself has a good reputation in the industry, and with the excellent user experience of their U Card, OneKey quickly became extremely popular, with almost everyone in the Chinese crypto community having a U Card.

However, after operating the Card business for some time, OneKey first suspended KYC verification for mainland China, meaning mainland users could no longer register.

Later, they completely shut down the Card business, indicating the tremendous compliance pressure they faced.

On the other hand, it’s also evident that without new users coming in, the Card business itself wasn’t developing well. Initially, the Card business brought in many users and brand exposure, but now it had become a burden that was difficult to shed, and the Card business had completed its historical mission for OneKey.

But it’s undeniable that cashing out has always been the biggest and most painful need in the crypto industry, otherwise the OneKey Card wouldn’t have been so popular initially.

The key issues preventing Onekey Card from continuing operations were compliance costs and operational costs, and projects with strong resources and backgrounds are best suited for this business.

Project teams need sufficient resources to support the Crypto Card business.

Crypto Card is a low-margin project that requires large transaction volumes and asset deposits to be profitable. However, as the business scale expands, compliance and operational costs increase significantly. Overall, being able to scale up is key.

For many Web3 companies, the Crypto Card business shouldn’t be their main business but can be tried as a sideline, preferably one that creates synergies with their main business.

After Onekey Card ceased operations, a market gap emerged, which projects like Bitget exchange and Infini Card are now filling.

Bitget’s main business is its exchange. With ample financial resources, project resources, compliance capabilities, and user traffic, it’s naturally suited for the U Card business.

Cards like Infini Card have taken a different approach, combining DeFi features to provide users with automatic interest-generating services on their balances, attracting a wave of users with high annual yields.

These two projects are typical representatives in the U Card space.

3. Business matrix

Combining wallet services with the Crypto Card business is an excellent integration.

Wallet, as a place where users keep their assets, is next needed for transactions, financial management, and deposits and withdrawals.

(1) Trading: This is divided into on-chain trading and centralized exchange trading. Currently, centralized exchanges still dominate a significant portion of the market, but the scale of on-chain trading is growing. Most wallets develop DEX capabilities, and transaction fees are one of the wallet’s core revenue streams.

(2) Financial Management: This essentially involves packaging various DeFi products and Staking products.

(3) Deposits/Withdrawals: In the current environment where fiat-to-crypto exchange channels are not smooth, cashing out can be considered the most urgent need in the crypto space, and the profit margins are naturally very high.

This typically involves collaboration with OTC service providers and has high KYC requirements. Crypto Cards serve as an excellent supplement, offering an alternative way for small-amount withdrawals.

Therefore, for wallets, the Crypto Card business is a promising direction with strong synergistic effects.

This is why many wallets have begun offering U Cards, such as domestic wallets like OneKey and Bitget Wallet, as well as overseas wallets like MetaMask.

Wallets are extremely important infrastructure with high potential, as they serve as gateways to the Web3 world. When users and their assets are in the wallet, many subsequent services can be offered.

4. Conclusion

U Cards are essentially a centralized model, where users send stablecoins to the platform, and the platform allocates limits to their cards. When the platform’s accumulated funds become substantial, there’s a strong incentive for them to potentially abscond with the money or become targets for hackers.

Therefore, for users, U Cards carry relatively high risks, and it’s recommended to only store small amounts intended for daily expenses.

On the other hand, it’s best to choose a Crypto Card issued by a large platform or one with strong backing, as this can significantly reduce the risk of exit scams. If issues arise, these platforms are more likely to compensate users.

A typical example is the recent theft incident with Infini Card, where nearly $50 million was stolen, but the owner was still willing to compensate users out of his own pocket.

This highlights the importance of a project’s qualifications and background.

In conclusion, Web3 is a dark forest, and only by surviving long enough can one go far enough. Approach every operation with caution!

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1. This article is reproduced from [Yue Xiaoyu]，Original title: “Let’s talk about Crypto Card (U card) in depth. What exactly is the U card that many project parties have started to make?”, the copyright belongs to the original author [Yue Xiaoyu], if you have any objection to the reprint, please contact Gate Learn team, the team will handle it as soon as possible according to relevant procedures.

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