Hackernoon published a review of the ether.fi Cash Card, a new offering from the decentralized finance platform ether.fi, aims to answer that question. This DeFi-native Visa card takes a unique approach by allowing users to spend their crypto without having to liquidate their holdings.
The ether.fi Cash Card’s standout feature is what the team calls the “never sell” model. How can you spend money without selling your crypto? The answer is to use your crypto as collateral for a loan that funds your purchase. Practically, the card operates in two modes, behaving either like a high-yield debit account or a crypto-backed credit account.
One mode is “Borrow” or collateralized credit. Instead of selling crypto to spend it, the card automatically borrows against crypto holdings as collateral when you swipe, each card swipe instantly opens a loan position backed by assets. The purchase is in fiat, while the crypto stays put in a wallet or vault.
Because it’s borrowing, the original crypto isn’t sold, and so a taxable event that a sale would trigger is avoided. Afterward, the loan can be repaid (with interest) on a bespoke schedule, and the collateral is never touched as long as the loan is repaid. Notably, any yield earned on collateral (from staking or DeFi yields) can be used to automatically pay down the balance if opting in. In an ideal scenario, the investment rewards effectively subsidize spending.
It’s worth noting that using the credit feature requires a bit of DeFi savvy. The loan-to-value ratios need monitoring (if your collateral drops too much in value, like any crypto loan you could face liquidation of assets). However, ether.fi’s approach is to abstract these complexities away and it runs on the Scroll Layer-2 network for Ethereum.