Interpreting Crypto Banks: Wealth Remains on-chain, No Need to Go Off-chain for Spending

Author: Chilla Compiled by: Block unicorn

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Preface

There is a principle about mental accounting in behavioral economics. People's attitudes towards money can vary depending on where it is stored. One hundred dollars in a checking account feels like it can be spent freely, while one hundred dollars in a retirement account feels off-limits. Although money itself is interchangeable, its storage location can influence your perception of it.

Frax founder Sam Kazemian referred to this as the “net worth theory.” People tend to put spare money where most of their wealth already exists. If your wealth is primarily concentrated in the stock and bond accounts of Charles Schwab (, you would put dollars in the associated bank account because transferring funds between the two is very convenient. If your wealth is mainly in Ethereum wallets and DeFi positions, you would want dollars to interact with the DeFi world just as easily.

For the first time in history, a significant number of people are storing the vast majority of their wealth on the blockchain. They are tired of constantly transferring money through traditional banks just to buy a cup of coffee.

The new crypto bank is addressing this issue by building a platform that integrates all functions in one place. With these platforms, you can deposit money using interest-earning stablecoins and spend with a Visa card, all without having to deal with traditional bank accounts.

The rapid growth of these platforms is a response to the fact that the market finally has enough real users and sufficient on-chain real funds for cryptocurrencies, making it worthwhile to build such platforms.

Stablecoins seamlessly integrate into daily consumption

For more than a decade, cryptocurrencies have promised to eliminate intermediaries, reduce costs, and give users more control. However, there has always been one problem: merchants do not accept cryptocurrencies, and it is impossible to convince all merchants to accept cryptocurrencies at the same time.

You cannot pay rent with USDC. Your employer will not pay your salary in ETH. Supermarkets do not accept stablecoins. Even if you invest all your wealth in cryptocurrencies, you still need a traditional bank account to live normally. Each exchange between cryptocurrencies and fiat currencies incurs fees, settlement delays, and friction.

This is the reason why most cryptocurrency payment projects fail. BitPay tried to enable merchants to accept Bitcoin directly. The Lightning Network built a peer-to-peer infrastructure but faced difficulties in liquidity management and routing reliability. Both have failed to gain significant adoption because the conversion costs are too high. Merchants need to be certain that customers will use this payment method. Customers need to be certain that merchants will accept this payment method. No one is willing to take the first step.

The new cryptocurrency bank hides the coordination issues without a trace. You spend stablecoins from your self-custodied wallet. The new bank converts stablecoins into US dollars and settles with merchants via Visa or Mastercard. Coffee shops receive dollars as usual. They are unaware that cryptocurrency transactions are involved.

You don't need to persuade all merchants to accept cryptocurrency. You just need to simplify the conversion process so that users can pay with cryptocurrency at any merchant that accepts regular debit cards (which is basically everywhere).

Three pieces of infrastructure will mature simultaneously in 2025, making it possible after years of failed attempts.

First, stablecoins have been legalized. The GENIUS Act, passed in July 2025, provides a clear legal framework for the issuance of stablecoins. Treasury Secretary Scott Bensent predicts that by 2030, the transaction volume of stablecoins used for payments will reach $3 trillion. This is equivalent to the U.S. Treasury officially announcing that stablecoins have become a part of the financial system.

Secondly, the banking card infrastructure has been commoditized. Companies like Bridge provide ready-to-use APIs, enabling teams to launch complete virtual banking products within weeks. Stripe acquired Bridge for $1.1 billion. Teams no longer need to negotiate directly with card networks or build banking partnerships from scratch.

Thirdly, people now indeed own wealth on the blockchain. Early attempts at cryptocurrency payments failed because users did not hold significant amounts of net worth in cryptocurrency. Most savings were kept in traditional brokerage accounts and 401k retirement plans. Cryptocurrency was seen as a speculative tool rather than a place to store a lifetime's savings.

The situation is different now. Young users and native cryptocurrency users now hold substantial wealth in Ethereum wallets, staking positions, and DeFi protocols. There has been a shift in people's mental accounting. Keeping funds on-chain and consuming directly from the chain is much easier than converting them back to bank deposits.

Products and their functions

The differences between new cryptocurrency banks primarily lie in their yield rates, cashback rates, and regional coverage. However, they all address the same core issue: allowing people to utilize their cryptocurrency assets without having to forfeit self-custody or frequently convert them into bank deposits.

EtherFi processes over $1 million in credit card transactions daily, doubling in the last two months. Similarly, the issuance and burn rate of Monerium's EURe stablecoin have also seen significant growth.

This distinction is crucial because it indicates that these platforms are facilitating real economic activity, rather than merely speculation between cryptocurrencies. Funds are flowing out of the crypto circle and into the broader economic system.

That is the bridge that has been missing all along, and it has finally been built.

Over the past year, the competitive landscape has undergone tremendous changes. Plasma One, as the first native new bank for stablecoins, focuses on emerging markets with limited access to USD acquisition channels. Tria, built on Arbitrum, offers self-custody wallets and gas-free transactions. EtherFi has evolved from a liquidity re-staking protocol into a mature new bank with a total locked value of 11 billion dollars )TVL(. UR under Mantle prioritizes Swiss regulation and compliance, targeting the Asian market.

The methods vary, but the question remains the same: how to spend on-chain wealth directly without wasting time dealing with traditional banks?

Even if a new crypto bank is smaller in scale, it can still compete for another reason: users themselves are more valuable. The average balance in a checking account for Americans is about $8,000. In contrast, native cryptocurrency users often conduct transactions in the six or even seven figures across different protocols, blockchains, and platforms. Their trading volume is equivalent to that of hundreds of traditional bank customers combined. This fundamentally changes the traditional unit economics. A new crypto bank does not need millions of users to be profitable; it only requires thousands of the right customers. Traditional banks pursue economies of scale because the revenue generated by each customer is limited. However, a new crypto bank can establish a sustainable business even with a smaller user base, as each customer’s value in transaction fees, exchange fee income, and asset management is 10 to 100 times that of traditional banks. Everything becomes drastically different when ordinary users no longer deposit their $2,000 salaries twice a month like they do with traditional banks.

Every new cryptocurrency bank has independently constructed the same architecture: separate consumption and savings accounts. Payment stablecoins like Frax's FRAUSD, backed by low-risk government bonds, aim for widespread adoption, thus simplifying merchant integration. In contrast, yield-bearing stablecoins like Ethena's sUSDe optimize returns through complex arbitrage trades and DeFi strategies, which can yield annual returns of 4-12%, but their complexity exceeds what merchants can assess. A few years ago, DeFi attempted to merge these categories, assuming all assets were yield-bearing, but later found that the friction caused by merging these functionalities far outweighed the problems they solved. Traditional banks separate checking and savings accounts due to regulatory requirements. Cryptocurrency is fundamentally re-examining this separation because you need a payment layer that maximizes acceptance and a savings layer that maximizes returns. Trying to optimize both simultaneously will only harm both.

New cryptocurrency banks can offer returns that traditional banks cannot match. They leverage the bond yields that support stablecoins, merely adding a payment process for compliance. Traditional banks cannot compete with these rates because their cost structures are fundamentally higher, due to expenses such as physical branches, legacy systems, and compliance costs. In contrast, new banks eliminate all these costs and pass the savings back to the users.

The cryptocurrency space has attempted to build payment systems multiple times. What makes this time different?

This time the situation is different because all three necessary conditions are finally met simultaneously. The regulatory framework is clear enough, banks are willing to participate; the infrastructure is mature enough for the team to quickly deliver products; and most importantly, the number of on-chain users is large enough, and the wealth is substantial enough to ensure the viability of the market.

People's mental accounting has undergone a shift. In the past, people stored their wealth in traditional accounts and speculated with cryptocurrencies. Now, people store their wealth in cryptocurrencies and only convert it into fiat currency when they need to spend. New banks are building infrastructure to accommodate this change in user behavior.

Money has always been the story we tell about value. For centuries, this story has required intermediaries to validate it—banks to keep the ledger, governments to back the currency, card organizations to process transactions. Cryptocurrency once promised to rewrite this story without intermediaries, but it turns out we still need someone to mediate between the old and new narratives. New banks may play such a role. Interestingly, in building bridges between the two monetary systems, they haven’t created anything entirely new. They have merely rediscovered patterns that emerged over a century ago, as these patterns reflect the fundamental nature of humanity's relationship with money. Technology is constantly changing, but the story we tell about what money is and where it should exist remains surprisingly consistent. Perhaps this is the real lesson: we think we are disrupting finance, but in reality, we are just shifting wealth to places that align with the existing narrative.