On-chain credit to surpass crypto cards as payments shift

Crypto cards have gained attention as a convenience layer for spending digital assets, but a prominent founder argues they’re a transitional interface built on legacy rails. In a recent perspective, Vikram Arun, co-founder and CEO of Superform, makes the case that the real innovation lies in on-chain credit—where users can spend against productive, yield-bearing assets without selling them, and where risk is governed in public, transparent ways.

Arun’s central thesis is simple: the card is not the product. The true value comes from a credit line calibrated against a user’s on-chain balance sheet. As wallet infrastructure matures and on-chain credit becomes more capable, crypto cards risk becoming obsolete as a spender’s primary connection to value, replaced by systems that treat the card as a thin interface atop robust on-chain lending primitives.

Key takeaways

• Current crypto cards force asset liquidation to enable spending, creating taxable events and a false choice between liquidity and ownership.
• On-chain credit allows users to deposit yield-bearing assets, borrow against them, and spend without selling, so assets keep earning while debt increases with usage.
• Yield-bearing assets—such as certain stablecoins and DeFi positions—can provide meaningful returns (roughly 5% yield on staking-like yields, with DeFi strategies fluctuating around 5%–12%).
• Collateral can be diverse and productive, including vault shares, yield-bearing dollars, U.S. Treasuries, and strategy positions, enabling continuous earning until liquidation is required.

The problem with current crypto cards

According to Arun, today’s crypto cards rely on traditional financial rails: banks issue the cards, Visa or Mastercard anchor the networks, and compliance standards mirror conventional finance. This arrangement pushes users toward liquidating crypto to fiat to cover everyday purchases, which undermines the very premise of holding crypto-as-ownership.

From a tax perspective, the U.S. Internal Revenue Service treats conversions from cryptocurrency to fiat as taxable disposals. In practice, that means many routine purchases can trigger capital gains reporting, extracting value from productive holdings rather than letting assets compound. Even the revenue model for card issuers hinges on interchange fees—roughly 1% to 3% per transaction plus fixed fees—sustained by the existing interchange ecosystem. In short, the underlying architecture remains tethered to legacy liquidity and fee structures that reward selling over earning.

While the surface may appear decentralized, the dependencies run deep. The system’s friction comes not only from taxation and spend mechanics but from the incentive alignment that privileges immediate liquidity over long-term yield. The consequence is a spend interface that is compelling in the moment but structurally negative-sum for asset holders over time.

On-chain credit fixes these issues

The proposed alternative flips the paradigm. Instead of liquidating holdings to spend, users deposit yield-bearing assets and access a credit line against them. As the card is swiped, the user’s debt rises, yet the deposited assets continue to earn, and no asset is sold unless repayment fails. In this model, the “card” serves as an authorization surface, while the true product is the on-chain credit line, governed by transparent, programmable rules.

With on-chain credit, the spend is backed by a continually priced balance sheet. There are no forced conversions and no idle balances draining potential returns. Yield-bearing stablecoins can deliver about 5% yields, and DeFi lending and staking protocols historically offer roughly 5% to 12% returns depending on demand and incentive structures. This arrangement keeps users’ purchasing power intact while their assets keep generating value.

Crucially, this approach expands the set of eligible collateral beyond cash equivalents. Vault shares, yield-bearing dollars, Treasury-backed tokens, and strategy positions can all serve as collateral, allowing productive assets to compete for inclusion. The result is a system where the objective is to maximize productive use of capital, not simply convert assets into spendable fiat.

The card is just an interface

Under on-chain credit, the card becomes one of many possible interfaces to access credit. The essential question shifts from “What can I spend?” to “What can safely secure my credit?” Eligibility hinges on continuous pricing of collateral, risk bounds that are defined and enforced on-chain, and deterministic liquidation rules rather than discretionary, opaque risk assessments.

As Arun points out, the interface—whether a card, API, or wallet integration—can evolve without altering the core credit mechanism. If credit logic lives on-chain, cards become optional conveniences rather than essential rails. The same real-time authorization and risk checks can operate through programmable interfaces, while the collateral remains under the user’s control and continues to earn yield.

Visa’s recent coverage on crypto card usage—where spending surged in a growing ecosystem—illustrates both demand and friction: users want convenience, but the underlying model still adheres to traditional financial incentives. The move toward on-chain credit seeks to align incentives with user value: spending should not force asset liquidation, and risk should be transparent and governed by the community rather than a closed committee.

Managing risk through transparency

Risk and volatility are the immediate questions raised by any on-chain credit design. If collateral fluctuates, how can users avoid liquidation during a grocery run? The proposed solution is governance-driven conservatism: pre-set loan-to-value ratios that cap borrowing against collateral, paired with continuous pricing to reflect real-time risk. As collateral accrues yield, the buffer against liquidation can grow automatically, reducing sudden forced liquidations.

Unlike traditional credit models that mask risk behind adjustable rates and opaque terms, on-chain credit makes risk explicit. Governance parameters determine acceptable collateral types, pricing models, risk tolerances, and liquidation triggers. This transparency allows participants to opt in with a clear understanding of how their assets are protected (or liquidated) under stress scenarios.

In this framework, the card ceases to be the central product and becomes a user-friendly access point to a broader, programmable credit system. The long-term implication is a shift away from closed payment rails toward interoperable credit primitives that can be accessed via cards, wallets, or APIs, all anchored to on-chain governance and real-time risk management.

As Arun emphasizes, crypto cards won’t vanish simply because they fail; they’ll fade as on-chain credit proves to be a more productive, efficient, and transparent way to convert value into spendable power. The evolution—wallet-native credit with cards as optional interfaces—reads as a pathway to a more fluid, resilient on-chain economy where spending doesn’t require surrendering ownership prematurely.

Opinion by: Vikram Arun, co-founder and CEO of Superform.

The conversation around on-chain credit is ongoing. As wallets become more capable and the broader ecosystem experiments with programmable lending, readers should watch how governance frameworks mature, how collateral types expand, and how real-world spending adapts to a system that prioritizes continuous yield and transparent risk.