Chinese venture capitalists have heavily invested in artificial intelligence and cryptocurrency startups, with crypto card services linking digital assets to real-world payments surging despite increasing concerns about their use in illicit activities and sanctions evasion.
- Crypto startups raised $10 billion via nearly 750 deals in H1 2026
- Stablecoin card transactions hit $1.1 billion in August, tripling from a year prior
- Lax identity checks on crypto cards facilitate illicit and sanctioned activities
What happened
In 2026, venture capital investment surged not only in artificial intelligence but also in cryptocurrency finance, particularly in startups developing crypto-enabled credit and debit cards. These cards connect users’ crypto wallets to Visa and Mastercard payment terminals, allowing transactions in stablecoins that maintain value relative to major fiat currencies like the US dollar. China-based issuers such as Rain have secured substantial funding, enabling wider adoption of these cards globally despite stablecoins largely remaining stores of value rather than volatile currencies.
The issuance and transaction volume of these crypto cards have expanded rapidly, with Paymentscan reporting that transactions via stablecoin cards exceeded $1.1 billion in August alone, tripling the volume from the previous year. Visa and Mastercard’s strategic moves to open their networks to licensed crypto card issuers have further propelled this growth, allowing users worldwide to transact with these cards, which carry the logos of traditional payment giants alongside crypto service providers’ brands.
Why it matters
This growth has brought significant regulatory concerns, especially relating to illicit financial activity and sanctions evasion. Many crypto card providers have weak identity verification processes, making it easier for criminals, money launderers, and entities under economic sanctions to use these cards. Such vulnerabilities undermine global compliance efforts and pose risks to financial systems in both developing and developed countries.
Moreover, widespread use of stablecoins in crypto cards threatens to induce pseudo-dollarisation in poorer economies by circumventing local currency usage, complicating monetary policies. According to experts like Eswar Prasad from Cornell University, stablecoins create additional channels facilitating illicit transactions across borders, with TRM Labs estimating illicit crypto flows exceeded $158 billion last year. These dynamics highlight the urgent need for stronger regulations and improved compliance in the growing crypto payment card industry.
What to watch next
Regulatory bodies in China, the US, Europe, and Hong Kong have taken steps to clarify rules around digital currencies but face ongoing challenges in enforcing compliance among the expanding ecosystem of crypto payment card issuers. Monitoring how these jurisdictions evolve their oversight frameworks will be critical, especially regarding KYC standards and anti-money laundering protocols for crypto card providers.
On the market side, investors and regulators should closely watch the strategies of major card issuers like Rain, Wirex, and others as they expand their networks and product offerings. The development and deployment of more robust verification technologies and cooperation with traditional financial institutions could define the future credibility and legitimacy of crypto payment methods globally.