Crypto Credit and Debit Cards Visa, MasterCard: Should You Get One?

Coinbase launched its own debit card in an effort to promote the use of cryptocurrencies in payments and investments.


Some of the largest credit card companies on the planet are trying to make spending and earning bitcoin easier than ever.

But accountants and financial advisers tell CNBC there is a massive catch. Every time one of these crypto cards swipes, you are recording a “taxable event.”

“The one thing a lot of people don’t realize is that every time they spend crypto to buy a cup of coffee, or any type of consumer item, that triggers a capital gains event,” said Shehan Chandrasekera, CPA and Director of Tax Strategy at, a digital currency tax software company that helps clients track their cryptocurrencies via virtual wallet addresses and manage their corresponding tax obligations.

There is always a difference between how much you paid for the cryptocurrency, which is the cost basis, and the market value at the time you spend it. That difference can lead to capital gains taxes in addition to the other taxes you have to pay, such as sales tax.

But a lot of people don’t seem to mind the fiscal headache.

Visa, which partners with Circle, BlockFi and Coinbase, told CNBC in July that consumers around the world spent more than $ 1 billion worth of cryptocurrency on goods and services through its cryptocurrency-linked cards in the first six. months of 2021.

Meanwhile, this summer, MasterCard will launch a credit card with crypto exchange Gemini, co-founded by billionaires Cameron and Tyler Winklevoss.

The advantages are really attractive: no annual fees, up to 4% cash back in crypto rewards every time you buy something, plus it offers an easy way out for your crypto cash.

But perhaps the most important reason these tax implications are not depressing people has to do with the fact that they have no idea that they are racking up a tax bill every time they use their card.

“Some people say, ‘Oh, I’m not selling my crypto, so I don’t have to pay capital gains taxes.’ But that’s completely wrong, “said Chandrasekera.

Buying coffee is a ‘taxable event’

The IRS treats virtual currencies like bitcoin as property, which means they are taxed similarly to stocks or real estate.

“Every time you receive, sell or exchange cryptocurrency, the income must be recognized,” according to Shivani Jain, a certified public accountant and partner at the accounting, tax and consulting firm, Sax LLP.

“When you make a payment with a Coinbase card, it is considered that you have sold the cryptocurrency, resulting in a tax event,” he said.

Basically, the government says that if you buy something with crypto, it is as if you liquidated your crypto, not differently than if you had sold any other property. The IRS also doesn’t care how small the transaction is, it’s still taxable.

“There is no minimum for capital gains. It applies even for a penny of profit or even for less than a penny, in the case of a micro transaction, ”said Neeraj Agrawal of the Coin Center, a group of experts on cryptocurrency policy.

While Agrawal said the IRS is probably unlikely to go after you for a penny, it does mean that you are technically not complying with the law if you make a penny profit when you buy a coffee and don’t keep track of it. as a profit moment.

Experts tell CNBC that it is nearly impossible for bitcoin to function more like the cash it was intended to be with rules like these, which are nearly impossible to enforce entirely.

“The current treatment of property is very bad when it comes to consumer adoption of cryptocurrency as a payment method,” said Chandrasekera. “And it is your responsibility to calculate the taxes; keep good records of the cost base and the sale price ”.

Agrawal said a solution to create a “de minimis exemption” for crypto transactions, similar to what was proposed in the Virtual Currency Fairness Act presented to the Chamber last year. A de minimis exemption would mean that a fixed amount, perhaps up to $ 200, of capital gains for crypto-based transactions would be excluded from the capital gains reporting rule.


There are some loopholes to avoid paying taxes every time you swipe your crypto card.

Some cards, for example, are tied to a user’s stable coin holdings. Stable currencies are a specific subset of cryptocurrencies that have a value tied to a real-world asset, such as a fiat currency such as the US dollar or a commodity such as gold.

“There is no capital gains tax, because it is pegged to the US dollar,” explained Chandrasekera.

While there may be daily fluctuations of a few pennies, Chandrasekera says that in the end, it is irrelevant as it tends to balance out. “There may be days when you spend $ 0.98, others when you spend $ 1.02. So annually, things go down to zero, ”he said.

Crypto rewards also offer another way to counter some of these capital gains taxes.

When you spend with one of these cards, you can get back up to 4% in a crypto reward of your choice. Those crypto rewards have the potential to appreciate more than a reward denominated in a fiat currency like the US dollar. And like most card-based rewards programs, the amount earned is likely not taxable.

As of now, the IRS has no guidance on how crypto spending rewards will be taxed. However, if we look at how the IRS treats credit card rewards, we see that they are treated as rebates or discounts and are generally not taxable. Jain said.

That means that, in the meantime, until more guidance is available from the IRS, it would be reasonable to treat crypto rewards similarly, according to Jain.

Chandrasekera agrees that these rewards will likely not be taxed because the crypto rewards are not earned income for the spender, but rather are considered a discount off the sale price of what they are purchasing.

And then of course there is the possibility that the transaction equates to a capital loss, which is the flip side of the capital gains obligation. Chandrasekera says that these types of crypto debit card transactions would actually result in tax cancellations.

Once again, the user has the responsibility to calculate these losses, which can be cumbersome, since they would have to do so for each transaction with a cryptographic card.

Experts told CNBC that they are ultimately skeptical about whether a crypto card is worth the necessary accounting stunts. But the data seems to show that for now, at least, users are piling up on these cards.

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