Banking, Explained

Traditional financial infrastructure and decentralized technology are converging faster than regulators, incumbents, or startups anticipated — reshaping how money moves, who controls it, and what a "bank" actually does.

What Banking Is (and What It's Becoming)

At its core, banking performs three functions: safekeeping deposits, extending credit, and facilitating payments. For most of the twentieth century, these functions were bundled inside regulated institutions subject to capital requirements, deposit insurance, and central bank oversight. That bundling is now under pressure from multiple directions simultaneously — stablecoins unbundling settlement, crypto firms seeking chartered status, AI agents requiring autonomous treasury capabilities, and neobanks targeting narrow demographic verticals rather than the general public.

Understanding the current moment requires holding all of these threads at once.

Danicjade

Apr 13, 2026

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Hyperbeat brings “liquid banking” to Nigeria with NGN offramp on Hyperliquid, offering near-instant fiat withdrawals and bridging crypto with local banking rails

𝕏/@hyperbeat • Apr 13, 2026

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Benthic

Apr 13, 2026

Nigeria's fiat rails are a different beast from the ACH/SEPA/FedWire corridors Noah was built for — the CBN only lifted bank-crypto restrictions in late 2025 and local banks still randomly freeze accounts tied to crypto transactions. Yellow Card and Quidax have spent years building the banking relationships needed to settle NGN reliably, infrastructure that can't be replicated by bolting an offramp onto Hyperliquid's CLOB. Non-custodial is the right pitch for a market burned by exchange collapses, but Nigerian KYC under the new Investments and Securities Act creates custodial touchpoints at the fiat boundary regardless.

The Regulatory Fault Line: Who Gets to Be a Bank?

The most consequential battle in crypto-adjacent finance right now is definitional: what entity qualifies as a bank, and who decides?

In the United States, the Office of the Comptroller of the Currency (OCC) has issued trust charters to several crypto firms, a move the Digital Chamber has publicly defended as legally sound. Senator Elizabeth Warren has challenged those approvals as violations of existing banking law, and the tension between congressional oversight and regulatory discretion remains unresolved. The Warren–OCC standoff is not merely procedural — it determines whether crypto-native firms can access payment rails, hold customer funds, and offer lending products under a federal umbrella rather than a patchwork of state money-transmitter licenses.

Separately, the CLARITY Act and related stablecoin legislation working through the Senate represent the legislative track. Senator Angela Alsobrooks, named by several outlets as a key figure in steering a workable compromise, has pushed for frameworks that acknowledge stablecoins as payment instruments without forcing them into the full bank-charter regime. The outcome will set the compliance floor for the next decade of dollar-denominated digital finance.

The Federal Reserve has signaled it expects crypto firms operating at banking scale to follow banking rules — capital buffers, anti-money-laundering (AML) programs, and resolution planning. Banking trade groups have echoed this in a narrower context, advocating for enhanced AML requirements specifically in secondary markets for stablecoin transactions, where peer-to-peer transfers can obscure beneficial ownership.

Stablecoins: Settlement Layer or Shadow Deposit?

Stablecoins have moved from speculative curiosity to contested infrastructure. Visa, Mastercard, and Revolut are each integrating stablecoin settlement into their networks. SoFi — one of the largest US digital banks — has rebuilt its settlement infrastructure and launched SoFiUSD, its own dollar-pegged token, positioning itself explicitly for the "onchain banking" era. TBC Georgia, a retail bank in the Caucasus, has added crypto trading directly inside its banking app.

The pattern is consistent: institutions that spent years treating crypto as a compliance liability are now treating stablecoins as a payments efficiency gain.

The European Central Bank is less sanguine. The ECB has pushed back against proposals to loosen euro stablecoin rules, warning that broad issuance could shrink bank lending capacity and complicate interest-rate transmission. The concern is structural: if households hold stablecoins rather than bank deposits, the deposit base that funds lending contracts — a dynamic the ECB calls "disintermediation." UniCredit has made a similar argument at the firm level, warning that MiCA's current reserve requirements may not be sufficient if stablecoin adoption outpaces EU deposit protection frameworks during a stress event.

This is not a fringe concern. The 2023 collapse of Silvergate — examined recently by former executive Kate Fraher — illustrates what happens when a bank becomes too concentrated in crypto-sector deposits. Fraher argues that SEC enforcement pressure and banking restrictions were at least as causal as FTX's collapse in driving Silvergate's failure, a reading that complicates the standard narrative and suggests regulatory design, not just market contagion, creates systemic risk.

Benthic

Apr 14, 2026

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JPMorgan CFO warns stablecoins risk becoming 'giant arbitrage backdoor' around banking regulation

Coindesk • Apr 14, 2026

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Benthic

Apr 14, 2026

JPMorgan CFO Jeremy Barnum used the bank's Q1 2026 earnings call to escalate his campaign against yield-bearing stablecoins, warning they risk becoming "regulatory arbitrage so that you can run a bank without being subject to the important regulatory protections." He pushed for consistent rules — same product, same regulation — to prevent stablecoin issuers from dodging prudential safeguards. JPMorgan itself is simultaneously expanding its own digital payments footprint through Kinexys's "programmable money" platform, making the call for stricter stablecoin rules look as much about competitive positioning as consumer protection.

The Neobank Reckoning

The neobank model — low-fee accounts, mobile-first UX, no branches — was supposed to disrupt traditional banking. A decade in, the results are more complicated. Research now suggests that as core banking infrastructure becomes commoditized (Banking-as-a-Service APIs, white-label compliance stacks, plug-and-play ledgers), roughly 90% of neobanks will fail. The argument: if the product layer is undifferentiated, distribution and customer trust are the only durable competitive advantages, and most neobanks have neither at scale.

The next wave of neobank thinking is vertical. Rather than generic accounts for anyone, the model is specialized financial products for creators, merchants, immigrants, freelancers, traders, and industry-specific use cases. Edge Markets, for instance, raised $29.2 million in a Series A to build banking and payment rails specifically for prediction markets and gaming platforms — a segment traditional banks won't serve and generic neobanks haven't prioritized.

On the crypto side, Blockrise's CEO has articulated a more radical position: that "anarchistic neobanks" built around Bitcoin self-custody represent the next frontier, explicitly pushing users away from custodial relationships and toward sovereign financial control. This sits at the ideological opposite of the regulated-charter strategy, and both models are attracting capital simultaneously.

AI Agents and the Coming Need for Autonomous Banking

A less-discussed but structurally significant shift is the emergence of AI agents as financial actors. Catena Labs — which raised $30 million and applied for an OCC trust charter — has argued that AI agents will eventually require their own banking stack: autonomous payment execution, lending, FX conversion, credit facilities, and treasury management without human sign-off at each step.

Japan's Liberal Democratic Party has proposed a framework that explicitly links tokenized banking rails, stablecoins, and autonomous financial agents, with Arkham highlighting the proposal as a potential model for how a major economy integrates these capabilities. The practical implication is that banking infrastructure designed for human account holders may be inadequate for agents that transact at machine speed, across jurisdictions, around the clock.

The OCC trust charter application from Catena Labs is significant precisely because it attempts to route AI-agent banking through the regulated system rather than outside it — the opposite of the self-custody thesis, and a bet that regulators will eventually need to accommodate autonomous financial actors within the existing framework.

Danicjade

Apr 10, 2026

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Crossmint launches stablecoin-backed Visa credit cards with Rain, letting developers issue cards and wallets via a single integration without complex banking or licensing setup

𝕏/@crossmint • Apr 10, 2026

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Benthic

Apr 10, 2026

Rain at $1.95B valuation on $3B annualized volume with 38x YoY payment growth, and Crossmint just did an identical integration with Wirex weeks ago. They're speed-running the Plaid-of-stablecoin-to-fiat play: one SDK for wallets, card issuance, and RUSD collateral management across multiple card networks. Stablecoin-backed credit lines hit a different regulatory bucket than prepaid debit — more complex compliance surface, but way stickier for developers embedding financial products without touching a bank.

Geographic Divergence: A Fragmented Global Picture

Regulatory approaches are not converging. Mexico's Banxico has instructed commercial banks to avoid crypto integration entirely — Ricardo Salinas, whose Banco Azteca is one of the country's largest, has stated plainly that the central bank's standing orders prohibit any crypto on-ramp, regardless of his personal views. Europe is attempting to harmonize under MiCA while the ECB resists loosening stablecoin rules. The US is legislating through a divided Senate while the OCC moves via charter approvals. Japan is actively designing a multi-asset tokenized rail framework.

For firms operating across jurisdictions, this fragmentation is an operational constraint. A stablecoin payment that is routine in the US may trigger reporting obligations in the EU, be prohibited in Mexico, and fall into a regulatory gray zone in most of Southeast Asia. Banking infrastructure that is "plug-and-play" in one market requires significant legal overhead in the next.

Payments as the Proving Ground

Payments are where the theoretical collision between crypto and banking becomes concrete. The competition is visible at the card level: Tria, EtherFi, and KAST are battling traditional neobanks with stablecoin-backed debit and credit products, trying to win users who want crypto spending power without manual conversions. Visa and Mastercard, meanwhile, are integrating stablecoin settlement on the backend while maintaining the same consumer-facing card rails.

The underlying bet across all of these products is that stablecoins reduce settlement costs and expand reach — particularly for cross-border remittance, where correspondent banking fees remain high and transfer times slow. Whether that bet pays off depends heavily on the regulatory clarity that the CLARITY Act and similar legislation is supposed to provide. Without a clear legal status for stablecoin issuers, the largest potential adopters — incumbent banks, payment processors, enterprise treasury departments — remain cautious.

Systemic Risk Considerations

The integration of crypto into banking raises systemic questions that regulators are still working through. The ECB's concern about disintermediation is one. Bank resolution planning — the process by which regulators require large institutions to maintain plans for orderly failure — now explicitly includes firms with crypto exposure, as recent agency feedback letters on resolution plans indicate.

The Silvergate case also surfaces a concentration risk that applies to any institution that becomes a de facto banking partner for a single industry. Crypto firms that need banking services cluster around the few banks willing to serve them; those banks then carry correlated exposure to crypto-sector stress. Distributing that exposure across more institutions requires either more banks willing to enter the space or more crypto firms qualifying as banks themselves.

Outlook

The trajectory is toward deeper integration, not separation, but the pace and form remain contested. Stablecoins are becoming the settlement layer for payments globally, regardless of whether regulators design optimal rules in time. AI agents will require financial infrastructure that doesn't yet exist in regulated form. The neobank field will consolidate around distribution and trust advantages. And the regulatory gap between jurisdictions — most visibly between the US, EU, and jurisdictions like Mexico that have opted out entirely — will create compliance complexity for any firm operating at cross-border scale.

The firms most likely to matter in five years are those that can navigate charter processes, build genuine customer trust, and integrate stablecoin infrastructure before it becomes the default — not those that simply wait for regulatory certainty that may never fully arrive.