Crypto cards are no longer the future of digital payments, according to industry experts, as onchain credit systems gain traction as a more sustainable and innovative alternative. Vikram Arun, co-founder and CEO of Superform, argues that current crypto cards are merely temporary interfaces that fail to fully embrace the potential of blockchain technology. These cards rely on traditional financial institutions, such as banks, Visa, and Mastercard, as intermediaries, enforcing compliance rules that mirror those of traditional finance (TradFi). This structure, while familiar, undermines the core principles of decentralized finance (DeFi), which aim to eliminate intermediaries and enable direct, peer-to-peer transactions.

Impact on User Experience and Asset Management

Current crypto card models force users to liquidate their holdings to make purchases, effectively converting cryptocurrency into fiat currency. This process halts yield generation on the assets and creates a taxable event for every transaction. According to Arun, this is a flawed system that recreates the false choice between liquidity and ownership, which was meant to be eliminated by blockchain technology. The IRS treats the conversion of cryptocurrency to fiat as a taxable disposal, meaning each coffee purchase or grocery trip could trigger capital gains reporting and remove assets from productive use. This not only limits financial returns but also complicates tax compliance for users.

Card issuers typically earn 1% to 3% in interchange fees, plus a flat fee per transaction, from each swipe. While the infrastructure may look decentralized on the surface, the dependencies on traditional financial systems run deep. As Arun explains, this model reinforces the very paradigms that crypto was designed to escape. The result is a system that is structurally negative-sum without subsidies, making it an unattractive long-term solution for users seeking both liquidity and yield.

Rise of Onchain Credit Systems

Instead of forcing users to sell assets to spend, onchain credit systems enable users to deposit yield-bearing assets, open a credit line, and spend against it. In this model, each card swipe increases the user’s debt, but their assets continue to earn interest. Nothing is sold unless the user fails to repay their debt. If the value of the collateral falls below governance-defined parameters, liquidation is deterministic and transparent, ensuring that users are always aware of the risks involved.

This shift toward wallet-native credit is transforming the landscape of digital finance. In this model, spending does not reduce ownership; it increases debt. Collateral continues to compound until the credit line is repaid or liquidated. There are no forced conversions and no idle balances. Yield-bearing stablecoins currently offer about 5% yield, and DeFi protocols range from 5% to 12%, depending on demand and token incentives. Users who hold these assets in credit accounts can maintain their spending power while continuing to earn returns on their investments.

The transition from debit to credit fundamentally changes what is possible in digital finance. Once credit becomes the primary primitive, the question stops being “what can I spend?” and becomes “what can safely secure my credit?” Eligibility is no longer about whether an asset can be instantly liquidated into cash. It’s about whether it can be priced continuously, risk bounded, and unwound deterministically. This allows productive assets to compete for inclusion, such as vault shares, yield-bearing dollars, US Treasury-backed assets, and strategy positions, which are now considered first-class collateral without the need for conversion into idle balances.

Future of Payment Interfaces and Governance

The card is not the product; it is merely a consumer-facing compatibility layer, a thin authorization surface, and not the source of truth. What actually matters is the credit line itself: the ability to price a user’s onchain balance sheet and decide, in real time, whether a spend should be allowed. As Arun points out, the underlying question remains the same: Is this spend authorized against the user’s credit?

Cards serve merchants and consumers, but once credit is the primitive, interfaces become interchangeable. Software and autonomous agents can already request payment programmatically, whether through cards or APIs. If credit logic lives within the card, people remain locked into interchange fee structures, closed payment rails, and rigid KYC requirements. If credit lives onchain, cards become optional. Collateral stays in user-controlled accounts, spending is authorized in real time, and liquidation is deterministic.

Of course, this system raises questions about safety, particularly regarding volatility. If collateral can fluctuate in value, what protects people from being liquidated while buying groceries? Governance sets conservative loan-to-value ratios in advance, ensuring users can only borrow against a fraction of their collateral. As collateral earns yield, this buffer grows automatically. Pricing happens continuously, not at arbitrary intervals, and liquidation triggers are transparent from the beginning.

Traditional credit obscures risk through adjustable interest rates, surprise fees, and terms buried in legal documents. Onchain credit, however, makes risk explicit. Governance-set parameters mean the community decides what is acceptable, not a bank’s risk committee behind closed doors. The answer to managing this risk lies in how the system is governed. Governance controls which assets can be used as collateral, how they’re priced, acceptable risk levels, and when liquidations occur. People opt in by depositing collateral, and from that point on, the protocol enforces the rules without blanket access to funds or quietly changed parameters.

Crypto cards will not disappear because they failed, but because they succeeded in bridging crypto into a world that still runs on legacy rails. As wallets improve and crypto-native payments become standard, spending won’t require banks, issuers, or card networks at all. Interfaces will change, payment rails will evolve, but onchain credit will remain: the ability to spend without selling, to keep assets productive, and to enforce risk transparently.