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1. Crypto card rewards run ahead of what customers earn
Providers of crypto-linked payment cards are paying out rewards that exceed the revenue those cards generate, according to company executives interviewed in October, and they are betting that trading, lending and staking income will eventually make the customers profitable. Crypto card rewards now include cashback caps that keep rising, double-digit yields on balances and steep discounts on selected purchases, terms that traditional banks would struggle to match.
The common logic is customer acquisition. A card is a frequent, low-friction way to bring someone into a crypto platform, and each swipe keeps the account active. The risk is that a provider pays heavily to win a customer who never moves on to the services that earn money, or who leaves when the perks are scaled back. Several firms have already begun adjusting their terms, which offers an early look at how sticky the customers really are.
A basic piece of card economics explains the pressure. When a cardholder pays a merchant, the merchant's bank pays a fee, known as interchange, to the issuer. Rewards are normally funded out of that fee. In the European Union, interchange on consumer debit transactions is capped at 0.2%, which leaves little room for a 1% cashback offer, let alone a 10% or 20% one. Federal Reserve data show that U.S. debit transactions exempt from the federal cap averaged 1.21% in 2024, and credit cards can earn more than 2%, but even those rates sit well below the headline rewards some crypto cards advertise.
The structure of these products differs from a conventional bank card. Many crypto cards are debit or prepaid products that draw on a balance of stablecoins or other digital assets, and the issuer converts the balance to local currency at the moment of purchase. Because the balance sits with the provider, it can be put to work in lending or staking in the background, which is the source of the yield that many programs advertise. That arrangement is what allows a provider to promise returns far above those of a standard bank account, and it is also why the promises depend on market conditions that the provider does not control.
2. How KAST is covering its subsidy gap
KAST, a platform that issues Visa cards funded with stablecoins, has slipped from near break-even into losses as it has increased its growth spending. Its Reserve account advertises rewards of 8% to 12%, depending on membership tier, while the assets backing the account earn only 3.5% to 4%. KAST absorbs the difference.
Chief Executive Raagulan Pathy said Reserve had attracted tens of millions of dollars by September and that the subsidies are expensive, but he described them as a way to gain market share. KAST raised $80 million in March in a round led by QED Investors and Left Lane Capital, at a reported valuation of $600 million. In an interview conducted in October, Pathy said the company has four to five years of runway and that investors are not pressing it to turn a profit.
The company plans to build revenue through membership fees, services for businesses, tokenized stocks and better infrastructure terms as it grows. It did not disclose how much it spends on subsidies or give an updated Reserve balance, and it did not say directly whether it remains unprofitable.
The gap between what reserve assets earn and what customers are promised illustrates how a subsidy works in practice. If a balance earns roughly 4% and the customer is paid 10%, the provider spends the difference out of its own funds on every dollar held. Multiplied across tens of millions of dollars in deposits, the amount becomes meaningful, which is why investors and executives treat the spending as a deliberate cost of growth rather than an operating profit.
3. Why customers who only spend may not pay their way
Bleap, which offers up to 15% returns on crypto holdings and 20% cashback on purchases through a Mastercard, describes a similar tension. Eduards Timofejevs, chief executive of Bleap Latvia, said customers who use the product only to spend and collect cashback can be unprofitable for the company.
He pointed to scale and additional services, including trading, as the routes to better economics. Bleap's published terms set a default cashback rate of 1%, capped at 500 euros, about $560, per transaction and 3,000 euros per month. Higher rates, such as 20% on selected subscriptions, carry their own limits.
The distinction between spend-only users and customers who also trade, borrow or stake is central to the sector's thinking. A cardholder who also holds assets on the platform generates fees and yield that can offset the cost of rewards. One who merely spends is an expense until the provider finds another way to earn from them.
This is also why caps and tiers are common. Limits per transaction and per month keep the cost of the most generous rates bounded, and they steer heavy users toward higher membership levels where the provider can collect fees or other income in return.
4. What happens when the rewards change?
The real test of the model is whether customers stay when rewards become less generous. Bybit's European prepaid Mastercard offers an example. In June, the exchange announced that cashback tiers of 2% to 10% for non-VIP users, which had monthly caps, would be replaced by an uncapped flat 1%. The change took effect for existing cardholders on August 4. Subscription rebates were also reduced to a first-month benefit capped at 50 euros. Bybit said the simpler structure makes the card useful beyond high spenders.
Bleap made an adjustment of its own. An earlier 2% cashback rate became a 1% base rate combined with higher category rewards, and a February update removed a $10 cap, so the overall change was more complex than a simple cut. Neither Bybit nor Bleap responded to questions about how the changes affected users, spending or retention.
The answer matters because the payoff depends on customers remaining and using enough profitable services. If they leave once perks shrink, the money spent to attract them is lost.
Changes of this kind are a familiar step in the life of any rewards program. Card issuers in traditional finance have also trimmed benefits after launching with rich introductory offers, and the pattern usually follows the point at which a provider shifts from attracting users to making each one profitable. What distinguishes the crypto market is that the rewards are often larger and the margin for error smaller, so adjustments can arrive sooner and be more visible to customers.
5. How are exchanges treating cards as part of a wider relationship?
Some providers evaluate cards as one piece of a broader account relationship rather than a standalone product. A spokesperson for Krak, the money app from Kraken that runs on the Mastercard network, said in August that users average about 8.3 card payments a week and that retail and store purchases make up 59.3% of transactions. The app is nearing 200,000 cardholders and aims to become its users' primary account, and the company says it assesses the economics across the full customer relationship.
OKX takes a related approach. In an August blog post, Erald Ghoos, the exchange's Europe chief executive, described its debit card as a way to spend without moving funds from OKX to a bank, with VIP status unlocking higher cashback. The pitch is convenience for customers who already keep their money on the platform.
6. Credit, staking and other ways to fund the rewards
Other firms are designing their products around different revenue sources. Cero Finance founder Markuss Jonans, speaking at the UN:BLOCK conference in Riga, said the company combines yield and transaction revenue to fund game-like rewards, and that credit and lending are meant to become its main source of income. A planned card would help users build borrowing capacity through spending, linked accounts and repayment.
Ether.fi's Cash credit card connects to a staking service and managed vaults in decentralized finance. Cardholders can borrow against eligible staked assets that continue to earn yield. Borrowers pay interest, and the collateral can be liquidated if its value falls. A March research report found that about 80% of Cash users also used Liquid, Ether.fi's DeFi yield product. Its cashback starts at 3% and declines as monthly spending passes thresholds that vary by membership and currency. Lower rates apply only to spending above each threshold, and cashback already earned, paid in the ETHFI token, is unaffected.
Borrowing against a staked position adds interest income for the provider and keeps the customer's assets earning, although it also introduces liquidation risk for the user that a simple debit card does not carry.
The models differ in where they place the risk. A provider funding rewards through subscription-style membership fees depends on customers valuing the perks enough to pay for them. One relying on lending income depends on borrowers repaying and on collateral values holding up. One relying on staking yield depends on network rewards, which can fall as more participants join. Each approach trades one uncertainty for another, and none removes the need for the cardholder base to grow and remain active.
7. What this means for cardholders
For users, the practical lesson is that headline rewards reflect a provider's marketing budget as much as its sustainable economics. Offers funded by subsidies can change with little notice, as the Bybit and Bleap adjustments show, and caps, tiers and thresholds often determine what a cardholder actually receives.
Whether rewards come from trading, lending or staking income, they must ultimately be covered by revenue. Until providers reach that point, card users are collecting acquisition-level rewards on every swipe, and the next phase will show how many of them remain once the incentives are trimmed.
Readers comparing cards can look at several practical points: the cap on cashback per transaction and per month, whether the best rate depends on a membership tier, whether yield on balances is variable, and whether the issuer has changed its terms before. These details show how durable an offer is likely to be and how much of it depends on the provider continuing to subsidize it.