Written by: @BlazingKevin_, the Researcher at Movemaker.
Without the support of exchanges and card issuers, the U card struggles to escape its short lifecycle.
The current payment track is in an intermediate form before a qualitative change. Compared to the early stages, existing products have seen significant improvements in design details, usability experience, and compliance pathways, but there is still a considerable distance from building a complete and sustainable Web3 payment framework. Nevertheless, this 'not yet formed' state has become one of the focal points of market discussions over the past few months.
The U card, as the latest form of the current crypto payment narrative, is essentially an 'intermediate transitional mechanism'—it is neither a simple replication of traditional Web2 recharge cards nor the final form of the new generation of on-chain wallets or payment channels, but a product of the compromise between on-chain payment scenarios and off-chain consumption needs at this stage.
In practice, the U card achieves a composite model between 'Web2 familiar experience' and 'Web3 asset logic' by binding on-chain accounts with stablecoin balances, supplemented by compliance-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 everyday consumption' has never faded; on the other hand, it also indicates that stablecoins are attempting to move deeper into retail and local payment systems from traditional strong scenarios such as cross-border remittances and OTC settlements.
The U card is precisely the productized endpoint of this trend.
The U card attracted considerable market attention after enabling 'crypto 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 scaled back their operations after a short period, especially those without the backing of exchanges or primary issuers, which have basically struggled to survive.
The operational model of the U card essentially relies heavily on the permission of the traditional financial system, barely maintaining itself between compliance pressure and thin profits, making long-term sustainability difficult.
Strictly speaking, the 'U card' is not a commercially viable business model; it is merely one form of service that relies on external permission.
Project parties need to rely on multi-layer financial intermediaries such as card organizations and issuing banks to complete settlements, while they themselves are merely executors at the end of the chain.
A greater challenge lies in the fact that the operational costs of the U card are extremely high; it is essentially a loss-making business. The project party does not have the stable fee income that exchanges do, nor can it wield authority like primary issuers, yet it must bear the service pressure from users.
The key issue is that if the project party remains in the role of 'intermediary's intermediary', it can only operate passively at the bottom of the licensing ecosystem. To change this situation, there are two ways out: join the account system as an ecological connector to the crypto industry, gaining a voice in compliance mechanisms, and develop as part of the clearing system; or establish independence, waiting for the further improvement of the U.S. stablecoin bill, bypassing the current cumbersome and inefficient clearing system, and tightly embracing the new opportunities brought by U.S. dollar stablecoins as their status declines.
For wallets and exchanges, the U card is more of an auxiliary function to enhance user stickiness rather than a primary source of profit. For exchanges like Bybit, even if the U card business does not make money, it can lead to user growth and an increase in asset management scale. However, for Web3 startup teams that lack traffic entry and experience in financial infrastructure, attempting to rely on subsidies and scale to create a sustainable U card project is akin to a trapped beast in a cage.
Is the next step for crypto payments an underground bank or an on-chain 'new' bank?
Now we can confirm a preliminary conclusion: the traditional financial settlement system is what troubles crypto payments. However, there are many opinions in the market regarding what constitutes crypto payments; whether it is a complete imitation of daily life habits like scan to pay, or carving out a new meaning in anonymous networks? For the latter, the significance of payments does not lie in transfer but in deposits; hence, in this semantic context, the essence of payment is not settlement but circulation, which is an industry that has grown wildly in the dark forest alongside the development of blockchain.
Taking Chaozhou people and the underground banks of the Indian-Pakistani system as examples, they have constructed a digital ecosystem based on relationships, trust, and asset circulation. However, even if you want to become a 'Chaozhou person', the habits of 'Shandong people' may prevent you from fully adapting.
What is a Chaozhou-style digital bank? Its essence is trust; the flow of funds relies on 'trust', the asset deposits and cycles caused by delayed settlement rest on 'trust', the 'trust' generated from mutual understanding, and the risk of social death caused by a single betrayal forms a 'trust'. A Chaozhou-style digital bank requires introductions from acquaintances to join, effectively eliminating the possibility of strangers using it. There is an invisible mutual accountability mechanism between each person: you not only need to ensure that the person you recommend will not betray but also need to ensure that the next person in the chain will not betray, otherwise a single failure could uproot the entire lineage.
Under such mechanisms, payments are no longer a one-to-one relationship, but a one-to-many-to-one form that circulates continuously within such value networks.
Once funds flow in, it is an entry, not just for payments but also to gain trust. When non-payment funds continuously flow in, they form deposits, and as more 'Chaozhou people' gather in the bank, it becomes a slow-settlement but high-frequency social payment network. The continuously circulating and flowing value will bring rich returns.
In fact, the closed ecological structure of 'digital banks' has been operating on-chain for many years; it has indeed solved some issues of gray fund circulation, yet it has never been able to push 'crypto payments' from niche markets to mainstream applications. On the contrary, what truly possesses global potential and gradually approaches the user end is an on-chain settlement system built around U.S. dollar stablecoins, relying on a compliant network.
Let us first return to a factual question: the underground bank-style on-chain structure has actually long existed. Whether it is gray market arbitrage organizations in Southeast Asia or the Russian military using USDT for international settlements, digital assets have already developed sufficiently mature means to bypass the traditional financial system and achieve free capital circulation.
Especially with the rise of the Tron network, this logic is reflected. According to reports from on-chain security companies like TRM Labs and ChainArgos, between 2023 and 2024, over 40% of illegal on-chain fund flows occurred on the Tron network, with more than half completed through USDT.
These funds did not enter exchanges, but instead completed operations similar to 'mirror release' through OTC hedging, wallet 'island hopping', and DEX diversion. This mode of operation is highly similar to the overseas funding network constructed by Chaozhou people: it does not seek ultimate certainty at the settlement layer but relies on distributed trust chains and cross-border personal networks to ensure liquidity. The problem is, however, that this on-chain 'digital bank' has been running for five years; why have we not seen its explosion in crypto payments to date? Is it still in need of further development, or is its bustle fundamentally unrelated to you and me?
The root cause is that such models are not designed for ordinary users; they do not solve the problem of 'how to get more people to use cryptocurrencies for payments', but rather 'how to enable a few people to make untraceable payments with cryptocurrencies'.
Its starting point is to bypass, not 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 of Chaozhou people can build an efficient 'family transfer 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 resembles an efficient local area network that is highly resilient in marginal areas, yet difficult to connect with existing clearing systems in the global market.
From a systemic perspective, 'funds unwilling to leave' can indeed increase the platform's TVL and enhance the capital utilization of the DeFi ecosystem, but from the perspective of a payment system, a truly scalable system requires funds to be able to 'freely enter and exit', rather than 'entering but not exiting'.
The TON red envelope system and various on-chain point accounts are doing one thing: transforming the entry behavior of payments into deposits. This is similar to the 'balance treasure' logic of the Web2 era. This deposit model indeed has commercial value, but it cannot break the ecological barrier. Users cannot freely use the assets in their TON wallets for cross-border payments, merchant payments, or POS machine collections, nor can they obtain a stable mapping with real-world account systems. 'Chaozhou people' may not need mapping, but you cannot do the same things in the U.S. using 'Chaozhou dialect'.
In other words, this 'backyard circulation' model is not infrastructure, but a self-reinforcing ecological mechanism. Strengthening the usage scenarios of funds in a closed system is certainly important, but 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 layers for stablecoin payment networks. In 2024, the U.S. Treasury officially promoted the GENIUS Act and passed the Clarity for Payment Stablecoins Act in Congress, which for the first time assigned stablecoins the policy positioning of 'strategic payment infrastructure'.
Financial technology companies such as Circle, Paxos, Stripe, Visa, and Mastercard are rapidly advancing the application expansion of U.S. 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 scenarios of USDC and PYUSD are beginning to penetrate the retail end.
These are not the circulation deposits in the virtual economy, but rather the flow of funds between real goods and services, constituting settlement actions protected by law and compliant with audits. In contrast, token payments in the TON ecosystem and the 'scan to pay' functions of certain wallets still belong to the local functionalities within a closed system before truly entering enterprise financial reporting systems, cross-border e-commerce platforms, and credit networks, rather than global payment standards.
We cannot deny that the mechanism design of 'digital banks' is enlightening. Proposals such as Intent and account abstraction are indeed upgrading traditional on-chain payments from 'machine-to-machine' transfer activities to 'human intention-driven' fund coordination. This resonates philosophically with the application of 'relationship-driven trust' mechanisms in traditional underground banks. However, a systematic payment structure cannot be built solely on vague social trust and localized flow logic; it must ultimately connect to regulation, with traceability of user identities, transaction processes, and sources of funds.
At the same time, we must also view the development direction of crypto payments from a more macro perspective: as the global monetary status of the U.S. dollar faces structural challenges, the U.S. Treasury and monetary system are attempting to construct a new dual-track monetary system of 'dollar + dollar stablecoin'. Whether it is to hedge against the expansion of RMB settlements, respond to the trend of emerging markets using euro/gold settlements, or stabilize its financial influence in regions like the Middle East and Southeast Asia, stablecoins are no longer a marginal financial innovation but a strategic tool actively deployed by the U.S. in international financial competition.
This is also why in the past two years we have seen a comprehensive acceleration in the advancement of U.S. dollar stablecoins, from congressional legislation to Treasury guidance, from traditional bank participation to payment network embedding, with stablecoins deeply integrating into sovereign currencies and regulatory frameworks.
So the question arises: can a digital bank-style payment model carry such a strategic system? Clearly not. The essence of the underground bank model is to evade regulation, while what the U.S. aims to build is a globally embedded financial network; digital banks rely on community trust and gray area arbitrage, whereas the U.S. dollar stablecoin system must be built upon compliant financial institutions and regulatory permission chains.
It is hard to imagine that the U.S. Department of the Treasury would hand over a key payment infrastructure to be dominated by a funding network that relies on non-KYC wallets, anonymous bridging, and OTC trading. Digital banks can address circulation issues in the gray area, but they cannot constitute a sovereign national-level monetary governance structure. Stablecoins are being assigned this role.
In other words, the future of the crypto industry will not be one that coexists with gray industries; it played a supportive role in the dark side before the crypto industry had grown, but the approval of bitcoin ETFs has ushered the crypto industry into a new cycle, one that is fully integrated and interwoven with traditional finance.
Whether it's JPMorgan launching JPM Coin, BlackRock deploying the BUIDL fund, Visa integrating USDC, Stripe accessing on-chain payments, or Circle engaging with central banks across the globe, 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 excludes the expansion of underground bank logic, thus constituting the fundamental limitations of the 'digital bank' model as the main path for crypto payments.
The true future of Web3 payments lies in a network built upon U.S. dollar stablecoins and compliant settlement channels. It can embrace decentralization and openness while leveraging the credit foundation of the existing fiat currency system. It allows for the free flow of funds, without being superstitious about deposits; it emphasizes identity abstraction without evading regulation; it integrates user intentions but does not detach from legal boundaries. In this system, funds can not only enter the Web3 world but also leave freely; they serve not only on-chain financial activities but also embed themselves in global goods and service exchanges.
Digital banks are like water, formless, moving with the circumstances; a drop of rain falling into it becomes part of the sea. The next stage of crypto payments should resemble light, capable of merging yet having its own origin, tracing back clearly to find the way it came, not seeking to consume but focusing on illumination.
