Visa, MasterCard crypto credit and debit cards: should you get one?


Coinbase has launched its own debit card with the aim of promoting the use of cryptocurrencies in payments as well as in investments.


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

But accountants and financial advisers tell CNBC there is a huge trap. Every time you swipe one of these crypto cards, you register a “taxable event”.

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

There is always a difference between the price you paid for the cryptocurrency, which is the basis of the cost, and the market value at the time you spend it. This difference can trigger capital gains taxes, in addition to other taxes you have to pay, like sales tax.

But a lot of people don’t seem to care about the tax headache.

Visa, which partners with Circle, BlockFi and Coinbase, told CNBC in July that more than $ 1 billion in cryptocurrency has been spent by consumers around the world on goods and services through their crypto cards over the course of the first six months of 2021.

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

The advantages are indeed attractive: no annual fees, up to 4% in crypto rewards every time you buy something, and it offers an easy exit ramp for your cryptocurrency.

But maybe the main reason these tax implications don’t put people off is that they have no idea that they are running a tax bill every time they use their card.

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

Buying coffee is a “taxable event”

IRS treats virtual currencies like bitcoin like property, which means that they are taxed in the same way as stocks or real estate.

“Whenever you receive, sell or exchange cryptocurrency, the income should be recognized,” said Shivani Jain, a chartered accountant and partner at accounting, tax and consulting firm Sax LLP.

“When you make a payment with a Coinbase card, you are deemed to have sold the cryptocurrency, resulting in a tax event,” she said.

The government is basically saying that if you buy something with crypto, it’s like liquidating your crypto, which is no different than selling any other property. The IRS also doesn’t care about the size of the transaction – it’s always taxable.

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

While the IRS is probably unlikely to go after you for a dime, Agrawal said, it does mean that you are not technically following the law if you are making money for a dime when you buy a coffee and that you fail to track this as a earnings event.

Experts tell CNBC that it’s nearly impossible for bitcoin to function more like the money it was meant to be with rules like these, which are difficult to abide by completely.

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

Agrawal said a solution created a “de minimis exemption” for crypto transactions, similar to what was proposed in the Virtual Currency Fairness Act presented to the House 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 a few loopholes to avoid paying taxes every time you swipe your crypto card.

Some cards, for example, are tied to a user’s stable holdings. Stablecoins are a specific subset of cryptocurrencies whose value is tied to a real world asset, such as a fiat currency like the US dollar or a commodity like gold.

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

While there may be daily fluctuations of a few cents, Chandrasekera says that ultimately it doesn’t matter, as it tends to balance out. “There may be days you spend $ 0.98, other days you spend $ 1.02. So on an annual basis that brings things down to zero,” he said.

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

When you spend with any of these cards, you can earn up to 4% in crypto rewards of your choice. These crypto rewards have the potential to appreciate more than a reward denominated in a fiat currency such as the US dollar. And like most card-based reward programs, the amount won is unlikely to be taxable.

“At this time, the IRS has no indication of 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 discounts or rebates and are generally not taxable, ”Jain says.

This means that in the meantime, until further guidance from the IRS becomes available, it would be reasonable to treat crypto rewards the same, according to Jain.

Chandrasekera agrees that these rewards are unlikely to be taxed because crypto rewards are not income earned for the spender, but rather are seen as a discount off the selling price of whatever they buy.

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

Again, it is up to the user to calculate these losses, which can be tedious as they would have to do it for every crypto card transaction.

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


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