What's the key to encrypted banking competition
Author:Pink Brains
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Market patterns
Ask 10 users of encrypted money what a digital bank is, you might get the same answer: a card that allows you to consume a stable currency. Asking ten developers, the answers quickly diverge. Some people are developing non-trust wallets with Visa payment functions; others are splitting aave and calling them savings accounts; and a few are seeking full bank plates。
The monthly transactions of encrypted currency cards increased from about $100 million at the beginning of 2023 to over $1.5 billion at the end of 2025 (a compound annual growth rate of 106 per cent). The market is now on an annual scale of over $18 billion. In 2025, bank card consumption linked to the stable currency reached $4.5 billion, an increase of 673 per cent over the previous year。
But look who's dealing with these volumes. Chain-based bank card data show that RedotPay, a hosting platform based in Asia, dominates 60 per cent of the market share, trading roughly four times the sum of 13 subsequent competitors. By contrast, DeFi's home-grown, self-custody digital banks are dim in their trade volume charts。
However, the deeper story is the difference between encrypted and friendly giants. Between December 2025 and March 2026:
- Coinbase applied for a national trust license
- NuBank has been approved by the National Bank of America
- PayPal applied to create PayPal Bank
- Revolut has a full British bank license and is seeking an American license
- Kraken became the first encryption company to own the Fed's account
- 11 Companies applied for OCC Trust Bank licences within 83 days, including: Circle, Ripple, Bitgo, Paxos, Fidelity, Bridge, Cripto.com, Morgan Stanley, Payoneer, Zerohash, Protego
Over 50 encrypted digital banks have been online. The global digital banking market is expected to reach $55.2 billion by 2026 (according to The Business Research Company)。
We are trying to map digital banks — not just who is developing what, but who has the economic model that survives。
Core conflicts
Two conflicts at the centre shape the pattern of competition in the field of digital banking。
The first major conflict is economic. 76% of traditional digital banks are not profitable. Those who have succeeded (Nubank, Revolut, Sofi) are not profitable by swipe-card consumption, but by loan books and net interest income. Fees are just knock-on, and credit is the real core business。
Encrypted digital banks are now competing with fees and cash returns, a pattern of revenue that led to the failure of the first generation of financial technology companies. Stabilizing currencies makes the situation worse: they reduce foreign exchange earnings to near zero。
The second major conflict concerns the choice of users. CT Circle praises self-custody, DeFi proceeds and non-host wallets. But the chain of bank card transactions tells another story. The vast majority of encryption card consumption flows through hosting platforms, not because users do not know about self-cussion, but because when you just want to buy coffee, friction-free firsthand experience outweighs the quest for financial sovereignty。
History has always followed the same pattern: just as web-based mailboxes pre-encrypted e-mail penetration, Dropbox pre-encumbered storage populars, hosting exchanges pre-empted DeFi-dominant markets – whether encrypted digital banks will follow the same trajectory remains an open question。
Four prototypes of digital banks
Instead of dividing it by "Web2 and Web3" (which only reflects technology and does nothing about business models), it is more useful to look at the moat of a digital bank, its unit economics and its ceiling。
encryption friendly & amp; banking priorities
The central profit point for digital banks lies in the conversion of credit revenues and flows, not as a mere payment channel。
Nubank released $15.8 billion in revenue during the 2025 fiscal year, 85 per cent of which was from interest income. Credit card interest contributed $4.6 billion and loan interest contributed $4.8 billion. The monthly income per active user is $15, while the service cost is only $0.80, which is 19 times the return. In 2022, SoFi obtained a bank licence, and quarterly net interest income increased from $94.9 million to $617 million over four years, saving costs were 181 basis points lower than the cost of warehousing financing, resulting in annualization savings of approximately $680 million. Revolut achieved £3.1 billion in revenue across five business streams in 2024, with no single line of business accounting for more than 30 per cent, and the transaction/value line increasing 298 per cent over the same period。
Card-held digital banks have deliberately limited stabilization currency to payments, as the loan book is the source of their economic benefits. Revolut has not yet introduced stable currency balance gains; its participation in February 2026 in the British FCA sandbox test was based on the exclusive use of stable currency as a payment infrastructure rather than as a saving product. SoFi's Stable Currency (SofiUSD, introduced in December 2025) is a clearing line operated through the MasterCard network。
This restraint is based on a particular market condition: chain yields are currently uncompetitive. The USDC rate of return for Aave v3 has recently been 2.6% ASY, down from 3.3% of SoFi ' s savings ASY and Revolut Ultra 4.25%. However, the rate of return on the chain is subject to periodic compression. During DeFi ' s active period, Aave USDC had reached 8-10 per cent, and Ethena ' s rate of return was much higher. This gap is cyclical, and when it widens again, the dynamics of competition change。
Business and social super applications
MercadoPago, Grab, Wisdom, paid treasure. They did not initially intend to establish banks, but rather embedded finance in commercial applications. The moat is not the product itself, but the distribution of channels and behavioural data — which enables them to conduct more accurate credit assessments than any bank。
MercadoPago's credit income increased from $246 million in 2020 to $5.9 billion in 2025, a 24-fold increase in five years. Grab's portfolio increased from $185 million in 2022 to $1.3 billion at the end of 2025, and revenue from financial services for the financial year 2025 reached $348 million。
Both have explored stabilization coins. MercadoPago introduced Meli Dólar (MUSD) in Brazil and expanded to Chile and Mexico, but MUSD has a market value of $65 million, less than 0.4 per cent of its $19 billion AUM. Grab works with StraitsX to stabilize the currency, and tourists can get the dollar off-the-shelf through XSDD for the GramPay business in Singapore。
Neither of them explored stable currency gains. This is the breakthrough for encrypted native players and the most undervalued void in the field。
Whop deserves attention here. It is not a digital bank, but a market for creators. However, after Tether invested $200 million (valued at $1.6 billion), creators could accept USDT, hold stable currency and settle without banks. The integration of Plasma with Aave provided a stable currency gain, targeting 18.4 million users and $3 billion in annual creator income. MercadoPago was not a digital bank in 2003, but a third-party guarantee for the market — financial relations came with commerce. Whop is at the same start-up stage and has been built on encrypted networks since day one。
This is an inspiration for digital banks, with bank cards at their core, that the most lasting financial relationships may not begin with finance at all, but with electricians。
III. Transaction priorities
Robinhood, Coinbase, Binance, Kraken, Bybit, OKX - from the beginning of the encrypted centralization of monetary transactions and extended to encrypted banking. Each platform in this group is clearly structured at the bank level to generate income that is not dependent on cattle markets。
Robinhood is the most complete expression: the total assets of the Platform grew by about 70 per cent to $324 billion each year, and net deposits reached a record $68 billion. Coinbase is actively moving into the digital banking sector: its own L2 block chain (Base), its wallet with swipe card functionality, a encrypted support loan based on Morpho, a bitcoin mortgage in partnership with Better, and pending applications for trust licence plates. Kraken has both a trust licence and a Federal Reserve account。
These platforms start from the proceeds of transactions that already have a scale effect and are superimposed on banking. Stabilized currency banks go the other way: starting with a small fee and hoping to put everything on top of it — that is much more difficult。
IV. Stable currency preference (encrypted original)
I'm not sure if it's true. These platforms take advantage of the low operating costs of stabilization currency and the composition of DeFi as a back-end product infrastructure. Its value proposition is clear: self-cussion; DeFi earnings (5-15 per cent ASY in dynamic markets and 3-4 per cent in traditional savings); near-immediate cross-border payments based on stable currency, with minimal foreign exchange costs; and global portability without geographical constraints。
The most obvious structural advantage in emerging market and cross-border use is that of digital banks that give priority to stable currencies. Weaknesses, however, are equally real: no one has made a breakthrough in the size of a mortgage-free loan; they compete on the lowest profit margins (procedures), while cash, financed in currency, is returned to subsidized users for acquisition; and the stabilization currency makes the situation worse — reducing foreign exchange profits and settlement costs to close to zero, eroding the sources of income that sustains early digital banking。
Infrastructure
Most encrypted digital banks are based only on the front end of the shared infrastructure. Understanding this technology warehouse is essential for assessing its moat。
Bank Card Network (Visa, Mastercard): Although the number of projects is almost equal (more than 130 each), Visa, through early cooperation with encrypted primary infrastructure providers, accounts for more than 90 per cent of chain-based banking card transactions. This is an industry-wide single-point failure risk - if Visa changes its encryption policy, slows expansion or raises tariffs, the industry-wide economic accounts change overnight。
Cards (Rain, Reap, Baanx, StraitsX): A regulated bridge between the world and traditional finance. The most important structural development has been the emergence of the All-Inner Cards, which directly own the main membership of Visa/Mastercard, bypassing traditional sponsored banks。
Most encrypted digital banks share the same backend. Rain supports Esther.fi, RedotPay and Avalanche Card. In the event of a technical malfunction, regulatory problems or strategic shifts in Rain, the whole industry will be hit. The report of the Solar Partners analysis of 19 platforms notes that infrastructure concentration and supplier dependence are systemic risks — this is precisely the Sympse risk of encrypted digital banks。
(Note: Sympse, a United States financial science and technology infrastructure company, applied for bankruptcy in 2024 due to a financial segregation gap, resulting in the freezing of funds of dozens of cooperative platform users relying on its services as a landmark warning case for industry on the risk of infrastructure concentration
The threat of a wallet in its original stable currency
A often neglected competitive dynamic: major wallet providers are issuing their own stabilization coins, dedicated to financing bank card consumption and constructing closed ecosystems to capture the value that would otherwise have been earned by independent digital banks。
At the end of the third quarter of 2025, MetaMask launched mUSD and Phantom launched CASH, both of which were designed as financial mechanisms for their respective debit card products. The wallets do not depend on the user holding USDC or USDT, but rather build a closed ring - the user converts the asset into the wallet's original stable currency and is used to pay for the brush card consumption. Early data show a very different trajectory: the CASH of Phantom grew steadily from about $25 million in September to about $100 million in late December, while the MUSD of MetaMask fell to about $25 million and shrunk 75 per cent after peaking at almost $100 million in early October。
If the wallet succeeds in making its original stable currency a default source of funding, access fees, foreign exchange misdirections and reserve earnings are captured by the wallet platform itself. MetaMask, Phantom and Coinbase Wallet already have user relationships - adding digital banking functions is an extension of the product line, not a new product. Independent encrypted digital banks may thus lose a significant portion of their value claims。
The economic dilemma
76% of traditional digital banks are not profitable. Encrypted digital banks have inherited the same broken pattern — and stabilization currency makes the situation worse, not better. The lesson for bank priority players is clear: payments are only distribution channels, not core business. This is evidenced by the 85 per cent share of interest income of Nubank; the sofi licence-driven net spread (NIM) expansion. An encrypted digital bank that uses bank card consumption as an engine of core income is tantamount to building buildings on sand。
A sustainable model is the use of bank cards as a source of access to users, while monetizing finance through a more profitable chain: DeFi earnings, exchange transactions, structured products and borrowing。
Five things about changing the rules of the game
1. Chain credit rating
In the encrypted world, the history of wallet transactions, DeFi use patterns, repayments on loan agreements, pledge duration, frequency of transactions, diversity of agreements can be used as inputs for credit evaluation. No encrypted digital bank has achieved this on a scale yet. Whoever can do this first, it's like copying Nubank on a chain infrastructure without permission。
2. Encryption of original business to obtain full bank licence
It is not a trust licence (to be held in trust only), but a full licence that allows the absorption of deposits and the granting of loans. This would allow encrypted start-ups to build loan books based on stable currency deposits at a lower cost than storage finance facilities。
3. Regulating the legality of proceeds
The regulatory orientation of major markets is consistent: the issuer of a stable currency is not allowed to pay the proceeds. This red line has been clearly defined in the United States and Europe, and similar conservative positions have been adopted in major Asian markets such as Japan, Singapore and Hong Kong。
4. Agent-driven finance
AI agents perform financial operations on behalf of users - rebalancing investment portfolios, optimizing returns, managing payments and implementing cross-agreement strategies. The MasterCard had six encrypted partners in 2024 and had expanded to over 25 in 2025. Visa has introduced smart business connections to enable AI agents to shop around the world on behalf of users. Whoever is able to build the best proxy infrastructure on a stable currency network will take the next wave of traffic in the electrician sector。
5. Making chain operations unconscious
Encrypted digital banks still rely on a network of bank cards, but they already exist to bypass their payment terminals: two-dimensional payments to stabilize currency settlements, NFC touch payment, chain clearing cards without Apple Pay or Google Pay intervention. Projects such as OpenPasskey (based on Base) are proving that this path works: own IIN, P-256 encryption cards issued by ISO, fully unattended -- three payment methods, no Visa, no bank。
Who will win
We do not know yet. But the key variables of victory are already there。
Card-held digital banks have proved their economic model, and they dominate credit-driven user relationships, that is, most developed country markets. While stable currency-prioritized digital banks have brought with them a global carryable dollar, local stabilizers in emerging markets, access to DeFi revenues, and retroactive incentives, current data indicate that users are still more inclined to be simple to use than to encrypt the original idea. Commercially embedded participants may have the deepest moats because they already have distribution channels — but adding encryption to mature infrastructure is costly, requires user education and is highly dependent on regulatory clarity。
THE VALUE CAPTURED BY INFRASTRUCTURE LAYERS (CARDS, CUSTODIANS, FRENCH CURRENCY ACCESS MONEY, CORE BANKING SYSTEMS, BLOCK CHAIN CLEARINGS, KYC/AML) IS BOUND TO EXCEED ANY CONSUMER BRAND. MORE THAN 40 STABILIZATION CARDS ARE BEING ROLLED BACK WITH CASH SUBSIDIZED BY TOKEN, WITHOUT A REAL COMMERCIAL MOAT, SHARING THE SAME INFRASTRUCTURE — MOST OF WHICH WILL NOT LAST FOR THE NEXT TWO YEARS。
The pattern of encrypted digital banks is at a turning point。
