Crypto cards are moving out of the margins and into mainstream payment use, but the sector’s compliance weaknesses are becoming harder to ignore.
According to Paymentscan data cited in the article, monthly consumer spending through stablecoin cards has risen rapidly in recent years and exceeded $1.2 billion in September 2026, about three times the level seen a year earlier. The total stablecoin market capitalization has nearly doubled over the past two years to more than $300 billion. At the same time, a report published in April by blockchain analytics firm Crystal Intelligence said nearly 70% of crypto card providers had weak KYC requirements or none at all. TRM Labs estimated illicit crypto flows topped $158 billion last year.
Placed side by side, those figures point to the same conclusion drawn in the article: crypto cards are expanding fast, while identity verification standards in the market remain looser than many participants are willing to admit.
The article also notes that not every provider is lax. A meaningful share of issuers enforce strict KYC and set payment limits for certain high-risk merchants. The problem, it says, is not total industry-wide failure but uneven minimum standards, with the weakest operators shaping outside perceptions of the whole sector.
How weak KYC takes shape
The article argues that weak KYC is the product of business incentives and regulatory structure rather than a random flaw.
The first layer is offshore licensing and regulatory arbitrage. Some crypto card providers are licensed in the Caucasus or Gulf region, where KYC rules are looser and enforcement is weaker, while the cards they issue can still run on the global acceptance networks of Visa and Mastercard.
The second layer is the intermediary issuing model. Card networks grant membership to licensed issuers, and those issuers then lease network access to crypto card brands. The brand acquires users under its own name, while the issuer carries the formal compliance burden. As that chain gets longer, accountability can thin out.
The third layer is product design. Virtual cards are legal, but promises such as 「no documents, no waiting, no long forms」 amount, in the article’s view, to selling weak verification. Some providers ask for additional identity information only after a user has already started spending. Others allow the same user to try again with a different address.
Risk extends well beyond card issuance
The article says the consequences of weak KYC go far beyond a handful of bad actors obtaining cards.
One area is sanctions evasion. Individuals excluded from the Western financial system can obtain cards through Persian-language and Russian-language channels, creating payment access for people and businesses in sanctioned regions.
Another area involves export restrictions on AI services. The article says Chinese social media contains large numbers of tutorials showing users how to subscribe to restricted U.S. AI models such as ChatGPT and Claude by using crypto cards and false addresses to bypass geographic controls imposed by model providers.
It also points to weaker-currency economies. In countries facing severe inflation and unstable local currencies, stablecoins can create de facto dollarization, putting pressure on local monetary sovereignty.
The reputational burden can then shift to card networks and banks. Visa said illegal activity is prohibited on its network, while Mastercard said no-KYC reloadable cards are prohibited. Once a brand becomes associated with no-KYC cards, the article says, undoing that perception can take a long time.
Regulators and card networks are tightening standards
The article says the balance is now moving toward compliance.
In the United States, the regulatory approach is to bring stablecoins and crypto payments into the existing financial regulatory framework and clarify licensing and reporting obligations. In Europe, the Markets in Crypto-Assets framework, or MiCA, imposes reserve, redemption, and licensing requirements on stablecoin issuers, while crypto-asset service providers must obtain authorization in member states. Hong Kong has adopted a licensing regime for virtual asset service providers.
At the implementation level, MiCA divides stablecoins into asset-referenced tokens and e-money tokens, requires full reserves and redemption obligations from issuers, and sets issuance caps. In the U.S., Congress and regulators continue to contest stablecoin legislation, with the main disputes centered on issuer qualifications, reserve composition, and the level of supervision. In Hong Kong, licensed virtual asset service providers must meet customer due diligence, anti-money laundering, and transaction monitoring requirements.
Card networks are tightening as well. Visa and Mastercard continue to open their networks to licensed issuers, but they are also increasing compliance scrutiny of those issuers and setting explicit limits on no-KYC reloadable card products.
The article’s conclusion is direct: if crypto payments want a place inside mainstream finance, they will have to meet mainstream financial compliance standards.
What this means for compliant providers
The piece lays out three implications for legitimate service providers.
First, KYC is an access requirement, not a one-time task. Customer identity checks need to happen before account opening and before transactions occur, and they need to be updated throughout the customer lifecycle.
Second, KYT and transaction monitoring are ongoing capabilities rather than a pre-launch checklist. On-chain risk screening, unusual transaction detection, and sanctions list matching all need to sit inside day-to-day operations.
Third, merchant onboarding and end-customer risk need clear lines of responsibility. Providers should be able to show who performs KYC, who handles risk screening, how funds are treated when anomalies appear, and which jurisdiction’s rules govern those arrangements.
The article says those three layers are the same questions payment service providers answer in practice: what identity information was verified before account opening, what risks were screened during transactions, and who handles exceptions within what time frame.
Compliance is shifting from cost item to entry ticket
Among formal service providers, the article says compliance is turning from a cost center into a gatekeeping requirement. With the same access to card network rails, compliance capability can determine the banking relationships a provider can secure, the issuance limits it can obtain, and the quality of merchants it can serve.
As one example, the article says mature payment providers with stronger compliance capabilities may split KYC/AML and on-chain risk screening across specialist vendors: customer identity verification and anti-money laundering supported by Sumsub, and KYT plus on-chain risk screening connected through Elliptic. The point is to place compliance inside the flow of every transaction.
For merchants and cardholders, the cost of compliance is visible. Opening an account may require documents, transactions may trigger risk controls, and some high-risk use cases may be rejected. But the article says the value is hard to replace: account stability, traceability of funds, and the possibility of long-term cooperation with licensed financial institutions. As weak-KYC practices come under greater exposure, the market may reprice what compliance is worth.
Even so, the article adds that compliance capability does not automatically equal market position. Competition in crypto cards is only beginning, and real expansion depends on whether providers can connect on-chain efficiency with bank-grade compliance.
Market access is concentrating around licensed institutions
In its closing section, the article argues that growth built on regulatory gaps and diluted accountability is temporary. Expansion driven by weak KYC and neglected compliance is unstable, and short-term gains can become future liabilities.
It also points to another signal: access to the crypto card market is concentrating around licensed institutions. After Visa and Mastercard opened network membership to licensed issuers, the focus of compliance review shifted from whether a card can be issued to how activity is monitored on an ongoing basis. That means compliance is no longer just a one-off licensing hurdle. It is a continuing investment that shapes operating costs and customer quality.
For payment infrastructure and value-added service providers, the article says the real prerequisite for growth is having an identifiable party behind every transaction that can be held accountable, audited, and supervised. That standard does not change just because the asset involved is fiat or crypto.
A note at the end says the data mainly comes from an Economist investigation titled "The AI boom is spawning a new kind of crypto scam," Crystal Intelligence’s April 2026 report, and data from TRM Labs and Paymentscan cited by The Economist. It adds that specific figures and card-network rules should be subject to official announcements.
The article also includes a compliance statement saying it was written by the DogPay team for industry information exchange only, does not constitute investment, legal, or financial advice, and that related products and services are not offered to the mainland China market.
