Table of Contents
ToggleIf you ask ten cryptocurrency users what a digital bank is, you'll likely get the same answer: a card that lets you spend stablecoins. Ask ten developers, and the answers will quickly diverge.
Some are developing non-custodial wallets with Visa payment capabilities; others are forking Aave and calling it a savings account; and a few are seeking to obtain a full banking license.
Monthly transaction volume for cryptocurrency cards grew from approximately $100 million at the beginning of 2023 to over $1.5 billion by the end of 2025 (a CAGR of 106%). The market now has an annualized size exceeding $18 billion. In 2025, stablecoin-linked bank card spending reached $4.5 billion, a 673% increase year-over-year.
But let's examine who's handling these transaction volumes. On-chain bank card data shows that RedotPay, an Asia-based custody platform, dominates 60% of the market share, with its transaction volume roughly four times that of its next 13 competitors combined. In contrast, DeFi-native, self-custodied digital banks pale in comparison on the transaction volume charts.
However, the deeper story lies in the convergence of these crypto-friendly giants. Between December 2025 and March 2026:
- Coinbase has applied for a nationwide trust license.
- NuBank has received conditional approval from the Office of the Comptroller of the Currency (OCC) of the U.S. National Bank.
- PayPal applies to establish PayPal Bank
- Revolut has obtained a full UK banking license and is pursuing a US license.
- Kraken becomes the first crypto company to have a Federal Reserve master account.
- Eleven companies applied for OCC trust banking licenses within 83 days, including: Circle, Ripple, BitGo, Paxos, Fidelity, Bridge, Crypto.com, Morgan Stanley, Payoneer, Zerohash, and Protego.
More than 50 crypto digital banks have already launched. The global digital banking market is projected to reach $552 billion by 2026 (according to The Business Research Company).
We are trying to map out the landscape of digital banking—not just who is developing what, but who has the economic model that survives.
Core Conflict
Two central conflicts have shaped the competitive landscape of digital banking.
The first conflict is economic. 76% of traditional digital banks are unprofitable. Successful ones (Nubank, Revolut, SoFi) don't profit from credit card spending, but from loan ledgers and net interest income. Fees are just a stepping stone; lending is the real core business.
Now, crypto digital banks are joining the competition with fees and cash rebates—the very revenue models that led to the failure of first-generation fintech companies. Stablecoins make matters worse: they squeeze foreign exchange margins to near zero.
The second conflict concerns user choice. The crypto community praises self-custody, DeFi yields, and non-custodial wallets. But on-chain bank card transaction volume tells a different story. The vast majority of crypto card spending flows through custodial platforms, not because users are unfamiliar with self-custody, but because when you just want to buy a cup of coffee, the frictionless user experience outweighs the pursuit of control over your funds.
History often follows a pattern: just as webmail became more widespread than encrypted email, Dropbox became more popular than self-hosted storage, and custodial exchanges dominated the market before DeFi—whether crypto digital banks will follow the same trajectory remains an open question.
Four prototypes of digital banking
Rather than using the "Web2 vs. Web3" distinction (which only reflects technology and offers no insight into business models), a more useful perspective is to examine a digital bank's moat, unit economics, and its ceiling.
I. Crypto-friendly & Prioritize banking business
The core profit of digital banks lies in credit revenue and traffic conversion, rather than simply acting as a payment channel.
Nubank reported $15.8 billion in revenue for fiscal year 2025, with 85% coming from interest income. Credit card interest contributed $4.6 billion, and loan interest contributed $4.8 billion. Monthly revenue per active user reached $15, while the service cost was only $0.80, representing a 19-fold return.
SoFi obtained its banking license in 2022, and its quarterly net interest income grew from $94.9 million to $617 million in four years. Its deposit costs were 181 basis points lower than warehouse funding costs, resulting in annualized savings of approximately $680 million. Revolut achieved £3.1 billion in revenue across five business streams in 2024, with no single business line accounting for more than 30% of total revenue. Its trading/wealth business line grew by 298% year-over-year.
Licensed digital banks deliberately limit stablecoins to the payments sector because their economic benefits primarily come from loan ledgers. Revolut has not yet introduced stablecoin balance yields; its participation in the UK FCA sandbox test in February 2026 involved using its proprietary stablecoin as a payment infrastructure, not a savings product. SoFi's stablecoin (SoFiUSD, launching in December 2025) operates through a settlement channel via the Mastercard network.
This restraint rests on a specific market condition: on-chain yields are currently uncompetitive. Aave v3's USDC yield recently stood at 2.6% APY, lower than SoFi's 3.3% savings APY and Revolut Ultra's 4.25%. However, on-chain yields are subject to cyclical compression. During periods of high DeFi activity, Aave USDC reached 8-10%, and Ethena's yield, driven by funding rates, was significantly higher. This gap is cyclical, and when it widens again, the competitive dynamics will change.
II. Business and Social Super Apps
MercadoPago, Grab, WeChat Pay, and Alipay—they didn't initially intend to build banks; instead, they embedded finance into their business applications. Their competitive advantage isn't the product itself, but rather their distribution channels and behavioral data—which allows them to conduct more accurate credit assessments than any bank.
MercadoPago's credit revenue grew 24-fold in five years, from $246 million in 2020 to $5.9 billion in 2025. Grab's loan portfolio grew from $185 million in 2022 to $1.3 billion by the end of 2025, with financial services revenue reaching $348 million in fiscal year 2025.
Both have explored stablecoins. MercadoPago launched Meli Dólar (MUSD) in Brazil and expanded its suite to Chile and Mexico, but MUSD has a circulating market capitalization of only $65 million, less than 0.4% of its $19 billion AUM. Grab partnered with StraitsX for stablecoin settlements, allowing travelers to make instant payments in Singapore dollars via the XSGD stablecoin at GrabPay merchants in Singapore.
Neither of them has explored stablecoin yields. This is the breakthrough for crypto natives, and also the most underrated gap in this field.
Whop is worth noting here. It's not currently a digital bank, but rather a creator marketplace. However, after Tether's $200 million investment (valuing the company at $1.6 billion), creators can accept USDT, hold stablecoins, and settle transactions without banks.
Plasma's integration with Aave offers stablecoin yields, targeting 18.4 million users and $3 billion in annual creator revenue. MercadoPago wasn't a digital bank in 2003 either, but rather a third-party guarantor for the market—financial relationships were inherent to commerce. Whop is currently at that same early stage, built on the crypto network from day one.
This suggests to digital banks that are centered around bank cards that the most enduring financial relationships may not begin with finance at all, but with e-commerce.
III. Transaction Priority
Robinhood, Coinbase, Binance, Kraken, Bybit, OKX—starting as centralized cryptocurrency exchanges and expanding their suites to include crypto banking services. Each platform in this group is explicitly building a banking layer to generate revenue that doesn't rely on bull markets.
Robinhood is the most complete example: its total assets grew by approximately 70% year-over-year to $324 billion, and net deposits reached a record $68 billion. Coinbase is aggressively expanding into digital banking: its own L2 blockchain (Base), a wallet with card-swiping functionality, crypto-enabled lending based on Morpho, Bitcoin-backed loans in partnership with Better, and a pending trust license application. Kraken, on the other hand, holds both a trust license and a Federal Reserve master account.
These platforms started with transaction revenue that had already achieved economies of scale, and then added banking services on top of that. Stablecoin digital banks, on the other hand, took the opposite approach: starting with meager transaction fees and hoping to add everything on top of that—which is much more difficult.
IV. Stablecoins First (Crypto Native)
Ether.fi, Gnosis Pay, RedotPay, KAST, Holyheld, Bleap, Ready, Tria, Cypher, Payy, and dozens of others. These platforms leverage the low operating costs of stablecoins and the composability of DeFi as a backend product infrastructure. Their value proposition is clear: self-custody; DeFi yields (5-15% APY in active markets, compared to 3-4% for traditional savings); near-instantaneous cross-border payments based on stablecoins with extremely low foreign exchange fees; and global portability without geographical limitations.
Stablecoin-first digital banks have the most pronounced structural advantages in emerging markets and cross-border use cases. But the weaknesses are equally real: none have made a breakthrough in scaling unsecured loans; they compete on the thinnest profit margin (fees) while subsidizing user acquisition with token-backed cash rebates; stablecoins make matters worse—compressing foreign exchange profits and settlement fees to near zero, eroding the revenue streams that sustain early-stage digital banks.
Infrastructure
Most crypto digital banks are simply front-ends built on shared infrastructure. Understanding this technology stack is crucial for assessing their competitive advantage.
Bank card networks (Visa, Mastercard): Although they are almost equal in the number of projects (over 130 each), Visa accounts for more than 90% of on-chain bank card transaction volume through early partnerships with crypto-native infrastructure providers. This is where the single point of failure risk lies for the entire industry—if Visa changes its crypto project policies, slows its expansion, or raises fees, the economics of the entire industry could change overnight.
Card issuers (Rain, Reap, Baanx, StraitsX): Regulated bridges between the on-chain world and traditional finance. The most important structural development is the emergence of full-end card issuers—companies that directly hold prime memberships with Visa/Mastercard, bypassing traditional sponsoring banks.
Most crypto digital banks share the same backend. Rain powers Ether.fi, RedotPay, and Avalanche Card. If Rain experiences technical glitches, regulatory issues, or a shift in strategy, the entire industry will be impacted. A report by Solus Partners analyzing 19 platforms points out that infrastructure concentration and vendor dependence are systemic risks—precisely the synapse risk for crypto digital banks.
(Note: Synapse is a US-based fintech infrastructure company that filed for bankruptcy in 2024 due to a funding segregation gap, resulting in the freezing of funds for dozens of partner platforms that relied on its services. This case serves as a landmark warning in the industry about the risks associated with infrastructure concentration.)
Threat of native stablecoins in wallets
An often overlooked competitive dynamic: major wallet providers are issuing their own stablecoins specifically to fund debit card spending, creating a closed-loop ecosystem to capture the value that would otherwise be earned by independent digital banks.
In late Q3 2025, MetaMask launched mUSD and Phantom launched CASH, both designed as funding mechanisms for their respective debit card products. These wallets do not rely on users holding USDC or USDT; instead, they establish a closed loop—users convert their assets into the wallet's native stablecoin, which they then use to make card payments. Early data showed drastically different trajectories: Phantom's CASH steadily grew from approximately $25 million in September to approximately $100 million in late December; MetaMask's mUSD, after peaking at nearly $100 million in early October, fell to approximately $25 million, a 75% decrease.
If a wallet successfully makes its native stablecoin the default source of funds, the wallet platform will retain the transaction fees, forex spreads, and reserve earnings. MetaMask, Phantom, and Coinbase Wallet already have established user relationships—adding digital banking functionality is an extension of their product lines, not a new product. Independent crypto digital banks may therefore lose a significant portion of their value proposition.
Economic challenges
76% of traditional digital banks are unprofitable. Crypto-native digital banks inherit the same broken model—and stablecoins make things worse, not better. The lesson for bank-first players is clear: payments are merely distribution channels, not the core business. Nubank's 85% interest income share proves this; the expansion of net interest margin (NIM) driven by its SoFi license proves it. Crypto digital banks that rely on bank card spending as their core revenue engine are building on sand.
The perpetual model uses bank cards as a channel to acquire users, while monetizing them through higher-margin on-chain finance: DeFi yields, exchange trading, structured products, and lending.
Five things that will change the game
1. On-chain credit scoring
In the crypto world, wallet transaction history, DeFi usage patterns, repayment behavior on lending protocols, staking duration, transaction frequency, and protocol diversity can all serve as inputs for credit assessment. Currently, no crypto digital bank has achieved this at scale. Whoever cracks this first will essentially be replicating Nubank's approach on permissionless on-chain infrastructure.
2. Crypto-native companies obtain full banking licenses
It's not a trust license (custody only), but a full license that allows for accepting deposits and issuing loans. This will allow crypto-native businesses to establish loan ledgers funded by stablecoin deposits at a lower cost than warehouse financing facilities.
3. Regulators should clearly define the legality of the profits.
The regulatory direction across major markets is consistent: stablecoin issuers are not allowed to pay out yields. The United States and Europe have clearly drawn this red line, and major Asian markets such as Japan, Singapore, and Hong Kong have also adopted similar conservative stances.
4. Agent-Driven Finance
AI agents perform financial operations on behalf of users—rebalancing portfolios, optimizing returns, managing payments, and executing cross-protocol strategies. Mastercard had six crypto partners in 2024, expanding to over 25 by 2025. Visa launched Smart Commerce Connect, enabling AI agents to shop on behalf of users at merchants worldwide. Whoever can build the best agent infrastructure on stablecoin networks will capture the next wave of traffic in e-commerce.
5. Make on-chain operations seamless.
Crypto digital banks still rely on bank card networks, but payment terminal technologies that bypass them already exist: stablecoin-settled QR code payments, NFC contactless payments without Apple Pay or Google Pay, and on-chain physical card swipes. Projects like OpenPasskey (based on Base) are proving this path is viable: possessing its own ISO-issued IIN, P-256 cryptography, and fully non-custodial encrypted cards—three payment methods, without Visa or banks.
Who will win?
We don't know yet. But the key variable that will determine the outcome is already there.
Licensed digital banks have proven their economic model, dominating in credit-driven user relationships—mostly in developed national markets. Stablecoin-first digital banks offer globally portable USD, native stablecoins in emerging markets, access to DeFi yields, and retrospective rewards, but current data suggests users still prefer simplicity and ease of use over crypto-native concepts. Commercially embedded players may possess the deepest moats, as they already control the distribution channels—but layering crypto functionality on top of mature infrastructure is costly, requires user education, and is highly dependent on regulatory clarity.
The value captured by the infrastructure layer (card issuers, custody, fiat currency deposits and withdrawals, core banking systems, blockchain settlement, KYC/AML) is destined to surpass that of any consumer brand. More than 40 stablecoin cards are locked in fierce competition based on token-subsidized cash rewards, lacking a true commercial moat and sharing the same infrastructure—most of which won't survive the next two years.
The landscape of crypto digital banking is at a turning point.
Related reports
Legal Analysis: Why did the MiCA Act cause OKX DEX to suspend services?
