Cardless and Coinbase launch stablecoin-backed credit card

Credit card platform Cardless has partnered with cryptocurrency exchange Coinbase to release a new payment card that uses stablecoins as collateral. The product targets stablecoin holders who cannot get a traditional unsecured credit card.

Michael Spelfogel, co-founder of Cardless, explained that the card is designed for a range of applicants. Some users might want this option because they believe in crypto but are still building their credit history and wealth. The card requires users to pledge some of their stablecoin holdings on Coinbase as collateral against the debt.

Cardholders pay an upfront fee of $49.99. However, they can continue earning yield on their sequestered USDC holdings, according to Spelfogel. The card is secured by stablecoins, meaning the lender can seize assets if the borrower defaults.

Building on an existing partnership

This stablecoin-secured card is not the first collaboration between Cardless and Coinbase. In September, the two firms launched a Coinbase-branded credit card in partnership with American Express. That card offered up to 4% cashback in bitcoin. Cardless declined to reveal how many of those cards have been issued so far.

Cardless has previously worked with other major brands, including Qatar Airways and Alibaba, to create custom credit card programs. The company believes traditional credit systems are slow and rigid, leaving many companies without the tools to design credit products on their own terms.

A new path for crypto holders

The new stablecoin-backed card targets people who might be ignored by traditional banks. Many crypto holders may have assets but lack the credit scores or banking history needed for a standard credit card. By using stablecoins as collateral, they can access a credit card and potentially build or improve their credit profile over time.

Spelfogel noted that applicants come from different parts of the credit spectrum. Some are just starting their crypto journeys and see this as a way to use their digital assets for everyday spending while keeping their stablecoin investments working for them.

Potential risks and considerations

While the card offers a way to borrow against stablecoins, users should be cautious. If the value of their collateral drops or if they fail to make payments, they could lose part of their crypto holdings. The fee of $49.99 also adds a cost upfront. However, for those who cannot get a traditional card, this product might provide a useful financial tool.

Overall, the partnership between Coinbase and Cardless reflects a growing trend of blending traditional finance with digital assets. It offers a practical use case for stablecoins beyond just trading or saving.