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 "dollar + dollar stablecoin."

Written by: @BlazingKevin_, the Researcher at Movemaker

U Card Struggles Without Support from Exchanges and Issuers

The current payment landscape is in a transitional phase before a qualitative change. Compared to the early stages, existing products have significantly improved in design details, usability experience, and compliance pathways, but there is still a considerable distance to building a complete and sustainable Web3 payment framework. Even so, 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 copy of traditional Web2 recharge cards nor the final form of a new generation of on-chain wallets or payment channels. Instead, it is a product of the current stage's compromise between on-chain payment scenarios and off-chain consumption needs.

In practice, the U Card binds on-chain accounts with stablecoin balances and is supplemented by compliance-friendly off-chain consumption interfaces, achieving a composite model that lies between "Web2 familiar experience" and "Web3 asset logic." 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 move from traditional strong scenarios like cross-border remittances and OTC settlements further into C-end retail and local payment systems.

The U Card is the productized endpoint of this trend.

After enabling "crypto assets to be spent," the U Card attracted considerable market attention. Bybit, Infini, Bitget, and others have successively launched related services, leading many to believe that "cryptocurrency payments are about to become mainstream." However, the reality is that most projects have contracted their operations after a brief period, especially those without the backing of exchanges or primary issuers, which have generally struggled to survive.

The operational model of the U Card is essentially highly dependent on the permissions of the traditional financial system, barely maintaining itself between compliance pressures 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 permissions.

Project teams need to rely on card organizations, issuing banks, and other layers of financial intermediaries to complete settlements, while they themselves are merely executors at the end of the chain.

The greater challenge lies in the fact that the operational costs of the U Card are extremely high, essentially making it a loss-making business. Project teams do not have stable fee income like exchanges, nor do they possess the power of discourse like primary issuers, yet they must bear the service pressure from users.

The crux of the problem is that if project teams remain in the role of "intermediary's intermediary," they can only operate passively at the bottom of the licensing ecosystem. To change this situation, there are two paths: either join the account system, acting as an ecological connector for the crypto industry within the account system, gaining a voice in compliance mechanisms, and developing as part of the clearing system; or establish independence, waiting for the further refinement of US stablecoin legislation, bypassing the current cumbersome and inefficient clearing system, and tightly embracing the new opportunities brought by dollar stablecoins as the dollar's status declines.

For wallets and exchanges, the U Card serves more as 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 generate profit, it can lead to user growth and an increase in asset management scale. However, for Web3 startup teams lacking traffic entry points and experience in financial infrastructure, attempting to subsidize and scale a sustainable U Card project is akin to a caged beast.

Is the Next Step for Crypto Payments Underground Banks or On-Chain "New" Banks?

We can now draw a preliminary conclusion: the traditional financial settlement system is what troubles crypto payments. However, there are many views on what constitutes crypto payments in the market. Is it a complete imitation of daily life habits like scan-to-pay, or is it seeking new meanings in the anonymous network? For the latter, the significance of payment lies not in transfer but in accumulation; thus, under this semantic framework, the essence of payment is not settlement but circulation, an industry that has been wildly growing in the dark forest alongside the development of blockchain.

Taking the Chaozhou people and the underground banks of the Indo-Pakistani community as examples, they have built 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 accumulation and circulation brought by delayed settlements depend on "trust," and the "trust" generated from mutual understanding creates a risk of social death from a single betrayal. Chaozhou-style digital banks require introductions from acquaintances to join, eliminating the possibility of strangers using them. There is an invisible joint liability mechanism between individuals: you not only need to ensure that the person you refer will not betray you, but also that the next person referred by your referrer will not betray you; otherwise, a single failure could uproot the entire network.

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

Once funds flow in, it signifies entry, not only for payment but also to gain trust. When non-payment funds continuously flow in, they form accumulation. As more "Chaozhou people" gather in the bank, it transforms into a slow-settlement but high-frequency social payment network. The continuous circulation of value will bring substantial returns.

In fact, the "digital bank" style of closed ecological structure has been operating on-chain for many years. It has indeed solved some issues of gray fund circulation, but it has never managed to push "crypto payments" from a niche market to mainstream applications. On the contrary, what truly possesses global potential and is gradually approaching the user end is the on-chain settlement system built around dollar stablecoins, relying on compliance networks.

Let us return to a factual question: the underground bank-style on-chain structure has actually long existed. Whether it is the gray market 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.

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 completed operations similar to underground banks' "mirror release" through OTC hedging, wallet "island hopping," and DEX diversion. This operational mode is highly similar to the overseas funding network constructed by Chaozhou people: it does not pursue final certainty at the settlement layer but relies on distributed trust chains and cross-border personal networks to ensure liquidity. The problem, however, is that this on-chain "digital bank" has been running for five years; why have we not yet seen its explosion in crypto payments? Does it still need to develop, or is its vibrancy inherently unrelated to you and me?

The fundamental reason is that such models are not designed for ordinary users; they do not solve "how to get more people to use cryptocurrency for payments," but rather "how to enable a few people to make untraceable payments using cryptocurrency."

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 Chaozhou-style financial network can build an efficient "family transfer system" between Thailand, the Philippines, and Hong Kong, but this does not mean that such a structure can transform into a globally scalable infrastructure. It resembles an efficient local area network, highly resilient in peripheral areas, yet difficult to connect with existing clearing systems in the global market.

From a systemic perspective, "funds unwilling to leave" can indeed increase a platform's TVL and improve capital utilization in 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 "come in but not go out."

The TON wallet system and various on-chain points accounts are doing one thing: transforming the entry behavior of payments into accumulation. This is similar to the "Yu'ebao" logic of the Web2 era. This accumulation model does possess commercial value, but it cannot break ecological barriers. 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 thing in the US using "Chaozhou dialect."

In other words, this "backyard circulation" model is not infrastructure but a self-reinforcing mechanism of the ecosystem. While strengthening the use scenarios 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 US policy for stablecoin payment networks. In 2024, the US Treasury officially promoted the GENIUS Act, and after the Clarity for Payment Stablecoins Act was passed in Congress, stablecoins were for the first time assigned the policy positioning of "strategic payment infrastructure."

Financial technology companies like Circle, Paxos, Stripe, Visa, and Mastercard are rapidly advancing the application expansion 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 accumulation in the virtual economy but the flow of funds between real goods and services, constituting settlement actions that have legal protection and audit compliance. In contrast, token payments in the TON ecosystem and the "scan to pay" functions of certain wallets still belong to local functions within a closed system before truly entering corporate 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 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 resonates philosophically with the application of "strong trust based on relationships" in traditional underground banks. However, a systematic payment structure cannot be built solely on vague social trust and localized circulation logic; it must ultimately connect to regulation, making user identities, transaction processes, and sources of funds traceable.

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 US dollar faces structural challenges, the US fiscal and monetary system is attempting to construct a new dual-track currency 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 US in international financial competition.

This is also why, in the past two years, we have seen a comprehensive acceleration in the promotion of dollar stablecoins, 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 bank-style payment model support such a strategic system? Clearly, it cannot. The essence of the underground bank model is to evade regulation, while what the US aims to build is a globally integrated financial network embedded with regulation; digital banks rely on community trust and arbitrage in gray areas, whereas the dollar stablecoin system must be built on compliant financial institutions and regulatory permission chains.

It is hard to imagine that the US Treasury would entrust a key payment infrastructure to a funding network that relies on non-KYC wallets, anonymous bridging, and OTC trading. Digital banks can solve circulation issues in marginal areas but cannot constitute a sovereign national-level currency governance structure. Stablecoins are being assigned this role.

In other words, the future of the crypto industry will not be one that coexists with the gray industry. While it supported the industry in its early, darker days, the approval of Bitcoin ETFs has ushered the crypto industry into a new cycle, one that is fully integrated and nested with traditional finance.

Whether it is JPMorgan launching JPM Coin, BlackRock deploying the BUIDL fund, Visa integrating USDC, Stripe accessing on-chain payments, or Circle engaging in policy alignment with central banks around the world, 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 bank logic, thus constituting the fundamental limitations of the "digital bank" model as the main pathway for crypto payments.

The true future of Web3 payments is built on a network based on 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 funds to flow freely in and out but does not blindly trust accumulation; 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 financial activities on-chain but are also embedded in global goods and services exchanges.

Digital banks are like water, formless and flowing with the current; a drop of rain falls into it and becomes part of the ocean. The next stage of crypto payments should be more like light, capable of merging with one another while having its own origin, tracing back to find the path it came from, not seeking to consume but focusing on illuminating.

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