USDT financial card usage soars, analysis of popularity reasons and potential tax legal risks

In recent years, with the rapid development of the cryptocurrency market and digital payment technology, some exchanges, wallet service providers, etc. have successively launched their own U card products. Some see it as the key to solving the Cryptocurrency OTC puzzle, others take a wait-and-see approach, and others are skeptical. In this article, FinTax will introduce you to the basics of USB cards and specifically remind you that you should not ignore the tax and other risks hidden in USB cards. This article is derived from an article written by FinTax and compiled, compiled and written by Wu Shuo. (Synopsis: Ark Report: Stable Coinvolume will break $15 trillion in 2024, surpassing payment giants Visa and MasterCard) (Background supplement: Japan's first Compliance Cryptocurrency credit card "Slash Card" is forecast to go public in 2025, and $SVL jumped 12% at one point) 1. U Card Concept 1.1 U Card A U card is a tool that provides financial services to cryptocurrency investors. U cards are used in a similar way to bank cards, through which cardholders can spend or withdraw cash directly, without the need to exchange virtual coins for Fiat Currency by themselves in advance. USB cards are divided into two categories: physical USB cards and virtual USB cards. Physical USB cards, such as MasterCard USB card, UnionPay USB card, etc., can accept a wider range and higher acceptance. Virtual U cards such as Dupay are mostly used for e-commerce or international payments, which are more convenient and flexible, but cannot be withdrawn at ATMs. Common U-card issuance patterns include the following: (1) Bank direct issuance. The bank leverages its own payment network and compliance framework to provide users with a stable cryptocurrency payment solution. (2) The bank cooperates with the cryptocurrency company issuance. At this point, the bank provides the traditional financial infrastructure, and the third-party company is responsible for the management and transformation of the cryptocurrency. (3) Independent issuance, a professional encryption payment company. Some companies focused on cryptocurrency payments independently issue U cards by partnering with payment networks such as Visa or MasterCard. (4) SaaS model cooperation issuance. This refers to the fact that some third-party payment companies offer the U Card issuance platform to channel providers or other financial service providers through a SaaS (Software as a Service) model. 1.2 Mechanism of use of U card The U card is more convenient to use, which is one of the important reasons why it is widely accepted. We can understand the mechanism of using the USB card in two steps. (1) deposit: The user deposits USDT into Wallet, and then deposits USDT from the Wallet address into the U card address. At this time, the U card operator will convert USDT Settlement into the corresponding foreign coin. (2) Cash withdrawal or consumption: Users can use the U card to withdraw cash at ATMs around the world, or they can directly swipe the U card to pay for the fee, and the payment is already the redeemed Fiat currency, not USDT. 2. Reasons for the popularity of USB cards 2.1 Protecting personal privacy Web3 users tend to pay more attention to personal privacy, including transaction privacy, and want to be able to remain anonymous when making payments or transfers, while USB cards provide users with excellent privacy protection mechanisms. On the one hand, virtual USB cards usually do not require real-name registration, allowing users to purchase or deposit anonymously; On the other hand, although physical USB cards may require a certain degree of KYC authentication, they still greatly reduce the risk of personal information exposure compared to the large amount of personal information required to conduct transactions through traditional banks. 2.2 Simplify the payment process U cards are usually able to provide instant payment and settlement, which not only avoids the latency that may occur in traditional bank transfers, but also does not need to convert USDT into Fiat Currency before use, which has strong convenience. At the same time, in addition to traditional POS payment, U card can also be paid through digital wallet, scan code payment, etc., compatible with various mainstream payment channels, with strong flexibility. 2.3 Drop Cross-Border Payment Costs U-Cards tend to have significantly lower fees than traditional payment channels, especially when it comes to cross-border payments. Here's a comparison of cross-border fees for multiple payment methods: 3. Potential risks of U cards 3.1 Tax risks Due to the support of anonymity or less real-name requirements, some users hope to avoid taxes through U cards, such as using U cards to conceal the source of income, so as to drop the amount of tax payable. First of all, although U cards have a certain amount of Anonymity, most U cards still rely on international payment networks (Visa, Mastercard, etc.). These payment networks record the details of each transaction, including the transaction amount, merchant information, transaction time, etc. As a result, the tax authorities can still actually trace the movement of the relevant funds through these transaction records. Secondly, for cross-border transactions, tax authorities can also track cross-border capital flows through the Forex monitoring system, bank information exchange and other means. Many countries have signed the Protocol for Automatic Exchange of Tax Information (CRS) (Common Reporting Standard), and cross-border capital flows are relatively transparent. In this way, the tax authorities will also be able to obtain information about transactions related to the USB card. Finally, in actual use, payment platforms may also conduct strict real-name reviews on large-value transactions. If users are involved in frequent large financial movements, the platform may ask for additional information such as proof of the legality of the source of funds. Therefore, tax avoidance through the U card is not actually feasible and may lead to tax audits and penalties. 3.2 Legal risks There are also several legal risks to be aware of when using a USB card. For example, in some countries with strict management of Forex, although the U Card does not set an upper limit for personal access to U, the export of funds exceeding the FOREX limit will also touch the FOREX management regulations, and if found by the FOREX management authority, it will be subject to administrative fines and even crimes. For another example, the legal status of cryptocurrency in some countries is not clear, and some countries completely prohibit the use of cryptocurrency. In this case, the use of the Cryptocurrency U card for transactions may also be considered illegal. Therefore, before using the USB card, users should understand the basic compliance requirements of their country and region. In addition, users should not use the USB card as a tool for breaking the law. For example, if a user uses a USB card to make high-frequency, large-value transactions, or help others cash out, they will also be considered illegal business or Money Undering activities and face criminal penalties. 4. Conclusion In short, with its strong privacy, convenient payment and low handling fees, the U card provides an excellent off-chain payment solution for cryptocurrency investors and has won many favors. However, USB cards are not perfect, and USB card users still face potential problems such as tax and legal risks, which must be treated with caution, otherwise the gains will outweigh the losses. Related reports Pornhub is blocked by more than 1/3 of the US states! 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