Is the next step for crypto payments underground money banks or “new” banks on the blockchain?

If the U card does not have support from exchanges and issuers, it is difficult to escape the short lifespan.

The current payment track is in an intermediate stage before a qualitative change. Compared to the early stage, existing products have made significant improvements in design details, usability experience, and compliance pathways, but there is still a considerable distance to truly building a complete and sustainable Web3 payment framework. Even so, this “still-unformed” state has instead become one of the focal points of concentrated discussion in the market over the past few months.

The U card, as the latest form of the current encryption payment narrative, is essentially a “transitional mechanism”—it is neither a simple replication of the traditional Web2 recharge card nor the ultimate form of the new generation on-chain wallet or payment channel. Rather, it is a product of the mutual compromise between the current stage of on-chain payment scenarios and off-chain consumption needs.

In practical terms, the U card achieves a composite model that bridges the “Web2 familiar experience” and the “Web3 asset logic” by binding on-chain accounts with stablecoin balances, supplemented by compliant and friendly off-chain consumption interfaces. This model has rapidly gained attention in the past six months, partly because users’ imagination of “on-chain assets being used for daily consumption” has never faded; on the other hand, it also indicates that stablecoins are attempting to further penetrate into C-end retail and local payment systems from traditional strong scenarios such as cross-border remittance and OTC settlement.

The U card is precisely the productization focal point of this trend.

U Card has attracted significant market attention after enabling “encryption assets to be spent.” Bybit, Infini, Bitget, and others have successively launched related services, leading many to believe that “cryptocurrency payments are about to become widespread.” However, the reality is that most projects shrink their operations after a short period, especially those without exchange backgrounds or support from primary issuers, which find it difficult to sustain.

The operational model of U cards essentially relies heavily on the permissions of the traditional financial system, barely maintaining itself between compliance pressures and thin profits, making it difficult to sustain in the long term.

Strictly speaking, the “U Card” is not a business model that can generate stable profits; it is merely one form of service that relies on external permissions.

The project party needs to rely on multiple financial intermediaries such as card organizations and issuing banks to complete the settlement, and itself is merely the executor at the end of the chain.

The greater challenge is that the operational costs of U cards are extremely high, essentially making it a lossmaking business. The project party does not have the stable fee income like an exchange, nor can it wield the same influence as primary card issuers, yet it has to bear the service pressure from users.

The key issue is that if the project party remains in the role of “intermediary of intermediaries,” it can only operate passively at the bottom of the licensing ecosystem. To change this situation, there are two options: either join the account system, becoming an ecological connection to the encryption industry within the account system, having a voice in compliance mechanisms, and developing as part of the clearing system; or establish an independent portal, waiting for further improvements to the U.S. stablecoin legislation, bypassing the current cumbersome and inefficient clearing system, and tightly embracing the new opportunities brought by U.S. dollar stablecoins as the status of the dollar declines.

For wallets and exchanges, U Card is more of an auxiliary feature to enhance user stickiness rather than a primary source of profit. Exchanges like Bybit, even if the U Card business is not profitable, can exchange it for user growth and an increase in asset management scale. However, for Web3 startups lacking traffic entry points and experience in financial infrastructure, trying to rely on subsidies and scaling to create a sustainable U Card project is akin to a caged beast.

Is the next step for encryption payments an underground market maker or an on-chain “new” bank?

Now we can reach a preliminary conclusion: The settlement system of traditional finance is what troubles encryption payments. However, there are many opinions in the market about what encryption payments are, whether it is completely imitating daily life habits like scan to pay, or taking a different path to find new meanings in the anonymous network. For the latter, the significance of payment lies not in transfer, but in accumulation; therefore, under this semantics, the essence of payment is not settlement, but circulation, which is an industry that has been growing wildly in the dark forest alongside the development of blockchain.

Taking the Chaoshan people and the underground money market of the Indo-Pakistani system as examples, they have built a digital ecosystem based on relationships, trust, and asset circulation. However, even if you want to become a “Chaoshan person,” the habits of “Shandong people” make it difficult for you to fully adapt.

What is a Chaozhou-style digital bank? Its essence is trust; the flow of funds relies on “trust”, the asset accumulation and circulation brought about by delayed settlement depend on “trust”, the “trust” generated by mutual understanding, and the risk of social death caused by a single betrayal forms “trust”. A Chaozhou-style digital bank requires introductions from acquaintances to join, eliminating the possibility of strangers using it. There is an invisible joint liability mechanism between individuals: you not only need to ensure that the person you recommend will not betray you, but also need to ensure that the next person in line from your referrer will not betray you. Otherwise, a single failure could uproot the entire lineage.

Under such a mechanism, payments are no longer a one-to-one relationship, but a form of one-to-many-to-one that continuously circulates within such value networks.

Once capital flows in, it is an entry into the market, not only for payment but also to gain trust. When non-payment capital continuously flows in, it forms a deposit. As the number of “Chaozhou people” in the money exchange increases, it transforms into a slow settlement but high-frequency social payment network. The continuously circulating and flowing value will bring substantial returns.

In fact, the “digital market maker” style closed ecological structure has been running on-chain for many years. It has indeed addressed some of the gray circulation issues of funds, but has never managed to push “encryption payments” from a niche market to mainstream applications. On the contrary, what truly has global potential and is gradually approaching the user end is the on-chain settlement system built around USD stablecoins, relying on compliant networks.

Let’s first return to a factual level issue: the underground money market maker style on-chain structure has actually long existed. Whether it is the gray industry arbitrage organizations in Southeast Asia or the Russian military conducting international settlements through USDT, digital assets have already developed sufficiently mature means to bypass traditional financial systems and achieve free capital circulation.

The rise of the Tron network is particularly a manifestation of this logic. According to reports from on-chain security companies such as TRM Labs and ChainArgos, over 40% of illegal on-chain fund transfers occurred on the Tron network between 2023 and 2024, with more than half completed through USDT.

These funds did not enter the exchange, but instead completed operations similar to “mirror release” of underground money houses through OTC hedging, wallet “island hopping”, and DEX diversion. This mode of operation is highly similar to the overseas fund network constructed by the Chaoshan people: it does not pursue the final certainty of the settlement layer, but relies on a distributed trust chain and cross-border interpersonal network to ensure liquidity. However, the question is, why after five years of such on-chain “digital money houses”, have we not yet seen its explosion in encryption payments? Does it still need to continue developing, or is its liveliness unrelated to you and me?

The root cause is that this type of model is not designed for ordinary users; it does not address the question of “how to get more people to pay with encryption,” but rather “how to enable a few individuals to complete untraceable payments with encryption.”

Its starting point is to bypass rather than to connect; it serves scenarios that do not wish to be covered by regulation, rather than user groups that need legal protection.

The financial network in the Chaoshan style can build an efficient “family remittance system” between Thailand, the Philippines, and Hong Kong, but this does not mean that such a structure can be transformed into a globally scalable infrastructure. It is like an efficient local area network, highly resilient in peripheral areas, yet difficult to interface with existing clearing systems in the global market.

From a systemic perspective, “funds unwilling to leave” can indeed increase the platform’s TVL and improve the capital utilization rate of the DeFi ecosystem. However, from the perspective of a payment system, a truly scalable system requires funds to be able to freely “enter and exit,” rather than “able to come in, but unable to go out.”

The TON red envelope system, along with various on-chain points accounts, is doing one thing: converting the act of payment entry into accumulation. Similar to the “Yu’ebao” logic of the Web2 era. This accumulation model indeed has commercial value, but it cannot break the ecological barriers. Users cannot freely use the assets in their TON wallets for cross-border payments, merchant payments, or POS machine collections, and they cannot obtain a stable mapping with the real-world account system. “Chaozhou people” may not need mapping, but you cannot do the same things in the United States using “Chaozhou dialect.”

In other words, this “backyard circulation” model is not infrastructure, but rather a mechanism for ecological self-reinforcement. While strengthening the use cases of funds in a closed system is indeed important, it does not constitute the foundational logic of “payment” as a global service.

What truly drives Web3 payments from the “dark web” to the “mainnet” is the support of U.S. policy for stablecoin payment networks. In 2024, the U.S. Treasury officially promoted the GENIUS Act, and after the Clarity for Payment Stablecoins Act was passed in Congress, stablecoins were for the first time given the policy positioning of “strategic payment infrastructure.”

Financial technology companies such as Circle, Paxos, Stripe, Visa, and Mastercard are rapidly advancing the application of dollar stablecoins in international settlements, merchant acquiring, and platform settlements. Data released by Visa in early 2024 indicates that over 30 global payment institutions are integrating USDC as a cross-border settlement asset; meanwhile, the issuance and use cases of USDC and PYUSD are also beginning to penetrate the retail end.

These are not the circulation and accumulation in the virtual economy, but the flow of funds between real goods and services, representing settlement activities that are legally protected and compliant with auditing. In contrast, the token payments in the TON ecosystem and the “scan to pay” function of certain wallets still belong to local functions within a closed system before truly entering corporate financial reporting systems, multinational e-commerce platforms, and credit networks, rather than being part of a global payment standard.

We cannot deny that the mechanism design of “digital money houses” is enlightening. Proposals like Intent and account abstraction are indeed upgrading traditional on-chain payments from “machine-to-machine” transfer actions to “human intention-driven” fund coordination. This has a certain philosophical resonance with the application of the “strong trust in relationships” mechanism used by traditional underground money houses. However, a systematic payment structure cannot be established solely on vague social trust and localized circulation logic; it ultimately must connect to regulation, ensuring traceability of user identity, transaction processes, and fund sources.

At the same time, we must also view the development direction of encryption payments from a more macro perspective: as the global monetary status of the US dollar faces structural challenges, the US fiscal and monetary system is attempting to construct a new dual-track currency system of “dollars + dollar stablecoins.” Whether it is to hedge against the expansion of RMB settlements, respond to the trend of emerging markets using euros / gold for settlements, or stabilize its own financial influence in regions such as the Middle East and Southeast Asia, stablecoins are no longer a marginal financial innovation but a strategic tool actively deployed by the US in international financial competition.

This is also why, in the past two years, we have seen the advancement of USD stablecoins accelerating comprehensively, from Congressional legislation to guidance from the Treasury Department, from the participation of traditional banks to the embedding of payment networks, deeply integrating into sovereign currencies and sovereign regulatory frameworks.

So the question arises: can a digital banking-style payment model support such a strategic system? Clearly not. The essence of the underground banking model lies in evading regulation, while what the U.S. aims to build is a globally embedded financial network with regulation; digital banking relies on community trust and arbitrage in gray areas, whereas the U.S. dollar stablecoin system must be built on compliant financial institutions and a regulatory permission chain.

It is hard for us to imagine that the U.S. Treasury would hand over a key payment infrastructure to a funding network reliant on non-KYC wallets, anonymous bridging, and OTC trading. Digital market makers can address circulation issues in the fringes, but they cannot constitute a sovereign national currency governance structure. Meanwhile, stablecoins are being assigned this role.

In other words, the future of the encryption industry will not be a future that coexists with the gray industry. It has played a supporting role in the dark side before the encryption industry has grown up. However, the approval of the Bitcoin ETF has already ushered the encryption industry into a new cycle, which is a future that fully integrates and interlocks with traditional finance.

Whether it’s JPM Coin launched by JPMorgan Chase, the establishment of the BUIDL fund by BlackRock, Visa integrating USDC, Stripe accessing on-chain payments, or Circle’s policy alignment with various central banks worldwide, these initiatives indicate that traditional finance is accelerating its entry into the on-chain world, and their standards are clear—compliance, transparency, and regulatory oversight. This set of standards inherently rejects the expansion of underground banking logic, thus constituting the fundamental limitation of the “digital bank” model as the main path for encryption payments.

The true future of Web3 payments is built on a network based on US dollar stablecoins and compliant settlement channels. It can embrace decentralized openness while leveraging the credit foundation of the existing fiat currency system. It allows capital to flow freely in and out, but does not blindly accumulate; it emphasizes identity abstraction, but does not evade regulation; it integrates user intent, but does not stray from legal boundaries. In this system, funds can not only enter the Web3 world but also leave freely; they serve not only the financial activities on-chain but also embed themselves in the global exchange of goods and services.

Digital money markets are like water, formless and flowing with the trends. A drop of rain falling into it becomes the ocean; the next phase of encryption payments should be like light, integrating with one another while having its own origin, tracing back to find the way it came from, not seeking to devour, but focusing on illumination.

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