Crypto Neobanks: A Bridge Between DeFi and Traditional Finance
Introduction: The Psychology Behind Crypto Net Worth
In behavioral economics, the concept of "mental accounting" plays a crucial role in how we treat money. The same amount of money can be perceived very differently depending on where it’s held. For example, spending $100 in a checking account might feel easy, while spending the same amount from a retirement account might seem unthinkable. This concept, which Frax founder Sam Kazemian calls "net worth theory," suggests that we tend to keep money where the majority of our wealth already resides.
If most of your assets are in stock and bond accounts, you’re more likely to keep your cash in linked bank accounts. Similarly, if most of your wealth is in Ethereum wallets and DeFi positions, you want an easy way to interact with the DeFi world. For the first time in history, a substantial number of people hold the vast majority of their wealth on-chain. They’re tired of having to transfer through traditional banks just to buy a cup of coffee.
Innovative Solutions: The Rise of Crypto Neobanks
Crypto neobanks are addressing this problem by building platforms that consolidate all functions into one place. With these platforms, you can save with yield-bearing stablecoins, make purchases with a Visa card, all without needing a traditional bank account. The rapid growth of these platforms reflects the fact that crypto now has enough real users and enough real on-chain capital to make building such platforms worthwhile.
Seamless Integration of Stablecoins into Everyday Spending
For over a decade, crypto has promised to cut out intermediaries, lower fees, and give users more control. But there's always been one problem: merchants don't accept crypto, and it's impossible to convince all merchants to accept crypto at once. You can't pay rent with USDC. Your employer won't pay your salary with ETH. Supermarkets don't accept stablecoins. Even if you invest all your wealth in crypto, you still need a traditional bank account to function in normal life. Every conversion between crypto and fiat incurs fees, settlement delays, and friction. This is why most crypto payment projects have failed. BitPay tried to get merchants to accept Bitcoin directly. Lightning Network built a peer-to-peer infrastructure, but struggled with liquidity management and routing reliability. Neither gained significant adoption because the conversion costs were too high. Merchants need to be sure that customers will use this method of payment. Customers need to be sure that merchants will accept this method of payment. Nobody wants to go first.
Crypto neobanks hide this coordination problem. You spend stablecoins from your self-custodied wallet. The neobank converts the stablecoins into USD and settles with merchants via Visa or Mastercard. The coffee shop receives USD as usual. They have no idea that there was a crypto transaction involved. You don't need to convince all merchants to accept crypto. You just need to streamline the conversion process so that users can pay with crypto at any merchant that accepts regular credit cards (which is basically everywhere).
Three Infrastructure Developments Fueling Growth
Three infrastructure developments matured in 2025 simultaneously, making this possible now after years of failed attempts. First, stablecoins became legal. The GENIUS Act, passed in July 2025, provided a clear legal framework for stablecoin issuance. Treasury Secretary Bessen predicts that stablecoin transaction volume for payments will reach $3 trillion by 2030. This is equivalent to the US Treasury officially declaring that stablecoins have become part of the financial system.
Second, credit card infrastructure became commoditized. Companies like Bridge offer out-of-the-box APIs that allow teams to launch full virtual banking products in weeks. Stripe acquired Bridge for $1.1 billion. Teams no longer need to negotiate directly with credit card networks or build banking partnerships from scratch.
Third, people now actually hold wealth on-chain. Early crypto payment attempts failed because users didn't hold much crypto net worth. Most savings were held in traditional securities accounts and 401k retirement plans. Crypto was seen as a speculative tool, not a place to store a lifetime of savings. That's different now. Young users and crypto-native users now hold substantial wealth in Ethereum wallets, staking positions, and DeFi protocols. There has been a shift in mental accounting. Keeping funds on-chain and spending directly from on-chain is much easier than converting back to bank deposits.
Products and Features: Tailored Solutions for Crypto Users
The differences between crypto neobanks mainly come down to yields, cashback rates, and geographic coverage. But they all solve the same core problem: enabling people to use their crypto assets without giving up self-custody or constantly converting back to bank deposits. EtherFi processes over $1 million in credit card transactions daily, and that has doubled in the past two months. Similarly, issuance and burn volume for Monerium's EURe stablecoin have both seen significant growth.
This distinction is critical because it shows that these platforms are facilitating real economic activity, not just speculation between cryptos. Money is crossing out of crypto and into the broader economic system. That's the missing bridge that has finally been built. Over the past year, the competitive landscape has shifted dramatically. Plasma One launched as the first stablecoin-native neobank, focused on emerging markets with limited access to USD onramps. Tria, built on Arbitrum, offers self-custodial wallets and gasless transactions. EtherFi has evolved from a liquid restaking protocol into a full-fledged neobank with $11 billion in total value locked (TVL). Mantle-backed UR is targeting the Asian market with a focus on Swiss regulation and compliance. Different approaches, but they solve the same problem: how to spend on-chain wealth directly without having to deal with traditional banks.
There's another reason why crypto neobanks can compete even at a small scale: the users themselves are more valuable. The average checking account balance in the US is around $8,000. Crypto-native users often transact six- or seven-figure amounts across different protocols, blockchains, and platforms. Their transaction volume is equivalent to the sum of hundreds of traditional bank customers. This radically changes traditional unit economics. Crypto neobanks don't need millions of users to become profitable, they just need thousands of the right customers. Traditional banks pursue economies of scale because the revenue generated by each customer is limited. Crypto neobanks can build sustainable businesses even with a smaller user base because each customer is worth 10x to 100x more in transaction fees, swap fee revenue, and assets under management. Everything is different when the average user no longer deposits a $2,000 paycheck twice a month like they do at traditional banks.
Innovative Architecture: Separating Spending and Saving
Each crypto neobank is independently building the same architecture: separate spending and savings accounts. Payment stablecoins like Frax's FRAUSD, backed by low-risk treasuries, aim for universal adoption, thus streamlining merchant integration. Whereas yield-bearing stablecoins like Ethena's sUSDe optimize for yield through complex arbitrage trades and DeFi strategies that can generate 4-12% APY, but whose complexity is beyond the evaluation scope of merchants. A few years ago, DeFi tried to merge these categories, defaulting to all assets being yield-bearing, but found that the friction of merging these functions far outweighed the problems it solved. Traditional banks separate checking and savings accounts because of regulatory requirements. Crypto is fundamentally re-examining this separation because you need a payment layer that maximizes acceptance and a savings layer that maximizes yield. Trying to optimize for both at the same time hurts both.
Crypto neobanks can offer yields that traditional banks can't match. They're leveraging the treasury yields that back stablecoins, simply adding a payment flow for compliance. Traditional banks can't compete on interest rates because their cost structures are fundamentally higher, such as physical branches, legacy systems, and compliance overhead. Neobanks cut all those costs and return the savings to users.
Why Now? The Convergence of Favorable Conditions
The crypto space has tried to build payment systems many times. What makes this time different? This time is different because all three necessary conditions are in place simultaneously. The regulatory framework is clear enough and banks are willing to participate; the infrastructure is mature enough and teams can ship products quickly; and most importantly, there are enough users on-chain and enough wealth on-chain to guarantee market viability. There has been a shift in mental accounting. In the past, people stored wealth in traditional accounts and used crypto for speculation. Now, people store wealth in crypto and only convert to fiat when they need to spend. Neobanks are building the infrastructure to accommodate this shift in user behavior. Money is always the story we tell ourselves about value. For centuries, that story has required intermediaries to validate it—banks keep the ledgers, governments back the currencies, card organizations process the transactions. Crypto promised to rewrite the story without intermediaries, but it turns out we still need someone to translate between the old and new narratives. Neobanks may play that role. What's fascinating is that in building bridges between two monetary systems, they're not creating something entirely new. They're simply rediscovering patterns that existed centuries ago, because those patterns reflect the fundamental nature of the human relationship with money. Technology changes constantly, but the stories we tell about what money is and where it should reside remain remarkably consistent. Perhaps that's the real lesson: we thought we were disrupting finance, but we're simply shifting wealth to where it aligns with the existing narrative. That's all for today, see you in our next article.
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