U cards are difficult to sustain in the long term, the future of encryption payments lies in Compliance stablecoin.

The current payment track is in an intermediate phase before a qualitative change. 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. This "still unformed" state has instead become one of the focal points of recent market discussions.

The U card, as the latest form of the current encryption payment narrative, is essentially an "intermediate transition mechanism". It is neither a simple copy of traditional Web2 recharge cards nor the final form of the next generation on-chain wallets or payment channels, but rather a product of the current stage where on-chain payment scenarios and off-chain consumption needs compromise with each other.

The U Card achieves a composite model that lies between "the familiar experience of Web2" and "the asset logic of Web3" by binding on-chain accounts with stablecoin balances and supplementing them with 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 usable for daily consumption" has never faded; on the other hand, it also indicates that stablecoins are attempting to further penetrate into C-end retail and local payment systems from traditional strong scenarios such as cross-border remittance and settlement.

However, most U-card projects have contracted their business after a short period of operation, especially those without the support of an exchange background or primary issuers, which are basically difficult to sustain. The operating model of U-cards essentially relies heavily on the permissions of the traditional financial system, barely maintaining between compliance pressure and thin profits, making it hard to sustain in the long term.

Strictly speaking, the "U Card" is not a business model that can generate stable profits; it is merely a service form that relies on external permissions. The project party needs to depend on multi-layered financial intermediaries such as card organizations and issuing banks to complete the clearing, while it is merely an executor at the end of the chain. The bigger challenge is that the operational costs of the U Card are extremely high, essentially making it a loss-making business. The project party does not have stable transaction fee income like exchanges, nor can it wield the same influence as first-level issuers, yet it has to bear the service pressure from users.

The key issue is that if project parties remain in the role of "intermediary of intermediaries," they can only operate passively at the bottom level of the licensing ecosystem. To change this situation, there are two ways out: if you can't beat them, join them, join the account system, connect the encryption industry as part of the account system's ecosystem, have a voice in the Compliance mechanism, 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 the status of the dollar 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 example, a trading platform may not make money from its U Card business, but it can exchange that for user growth and an increase in asset management scale. However, for Web3 startup teams that lack traffic entry points and experience in financial infrastructure, trying to rely on subsidies and scale to burn out a sustainable U Card project is no different from being a trapped beast in a cage.

The future of encryption payments lies in compliant stablecoin networks

Now we can reach a preliminary conclusion: the settlement system of traditional finance is what troubles encryption payments. But what exactly is encryption payment? There are many opinions in the market, whether it is completely imitating daily life habits with scan to pay, or exploring new meanings in the anonymous network. For the latter, the significance of payment is not in transfer, but in accumulation; therefore, under this semantics, the essence of payment is not settlement, but circulation, which is an industry that is crazily growing in the dark forest with the development of blockchain.

Taking underground banks in certain regions as an example, they have built a digital ecosystem based on relationships, trust, and asset circulation. However, even if you want to be part of such a system, habits prevent you from fully adapting.

The essence of this digital bank is trust. The flow of funds relies on "trust", the asset accumulation and circulation caused by delayed settlements depend on "trust", the "trust" that arises from knowing each other well, and the "trust" formed by the risk of social death caused by a single betrayal. This digital bank requires referrals from acquaintances to join, eliminating the possibility of strangers using it. There is an invisible collective accountability mechanism between everyone: you not only need to ensure that the person you refer will not betray you, but also that the next person in the referral chain will not betray you; otherwise, a single failure could uproot the entire chain.

Under such a mechanism, payments are no longer a one-to-one relationship, but rather a one-to-many-to-one form that continuously circulates within such value networks. Once funds flow in, it means entry, not only for payment but also to gain trust. When non-payment funds continuously flow in, the funds begin to accumulate. As more participants join the money exchange, it transforms into a social payment network that settles slowly but operates frequently. The continuously circulating and flowing value will bring substantial returns.

In fact, the "digital bank" style closed ecological structure has been running on-chain for many years. It has indeed solved some of the gray circulation issues of funds, but it has never been able to push "encryption payment" from the niche market to mainstream applications. On the contrary, what truly has global potential and is gradually approaching the user end is the on-chain settlement system built around USD stablecoin and relying on Compliance networks.

Let’s first return to a factual level issue: the underground money house-style on-chain structure has actually long existed. Whether it is gray market arbitrage organizations in Southeast Asia or certain countries using a stablecoin for international settlements, digital assets have already developed sufficiently mature means to bypass traditional financial systems and achieve free capital flow.

The rise of a certain blockchain network is a reflection of this logic. According to reports from some on-chain security companies, over 40% of illegal on-chain fund flows occurred on this network between 2023 and 2024, with more than half completed through a certain stablecoin.

These funds did not enter the exchange but were completed through OTC hedging, wallet "island hopping", DEX diversion, and other forms, executing a "mirror release" operation similar to underground banks. This mode of operation is strikingly similar to the overseas fund networks built in certain regions: it does not pursue the final certainty of the settlement layer but relies on a distributed trust chain and cross-border connections to ensure liquidity. But the problem is, this on-chain "digital bank" has been running for five years, why have we not seen its explosion in encryption payments to date? Does it still need to continue developing, or is its hustle and bustle unrelated to you and me?

The root cause is that these models are not designed for ordinary users; they do not address "how to get more people to use cryptocurrency for payments," but rather "how to enable a small number of people to make untraceable payments with cryptocurrency." Their starting point is to circumvent rather than connect; they serve scenarios that do not want to be covered by regulation, rather than user groups that require legal protection.

This financial network can build an efficient "family-style transfer system" between certain regions, but this does not mean that this structure can be transformed into a globally scalable infrastructure. It is like 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 not willing to leave" can indeed increase the platform's TVL and improve the capital utilization rate of the DeFi ecosystem. However, from the perspective of a payment system, a truly scalable system requires that funds can freely "enter and exit", rather than "coming in but unable to go out".

Some blockchain red envelope systems and various on-chain points accounts are doing one thing: transforming the payment entry behavior into accumulation. This is similar to the "Yu'ebao-ization" logic of the Web2 era. This accumulation model indeed has commercial value, but it cannot break the ecological barriers. Users cannot freely use the assets in these wallets for cross-border payments, merchant payments, or POS machine collections, nor can they obtain a stable mapping with the real-world account system. Some groups may not need mapping, but you cannot do the same thing this way elsewhere.

In other words, this "backyard loop" model is not an infrastructure but a mechanism for ecological self-reinforcement. While strengthening the use cases 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 from U.S. policy for stablecoin payment networks. In 2024, the U.S. Treasury officially promoted the GENIUS Act, and after the Clarity for Payment Stablecoins Act was passed in Congress, stablecoins were for the first time given the policy positioning of "strategic payment infrastructure."

Some mainstream fintech companies are rapidly advancing the application of US dollar stablecoins in international settlement, merchant acquiring, and platform settlement. Data released by a payment giant at the beginning of 2024 indicates that over 30 global payment institutions are integrating a certain stablecoin as a cross-border settlement asset; meanwhile, the issuance and use cases of some mainstream stablecoins are also beginning to penetrate the retail end.

These are not the circulation and accumulation in the virtual economy, but the flow of funds between real goods and services, which are settlement behaviors protected by law and compliant with auditing. In contrast, certain token payments in blockchain ecosystems and the "scan to pay" function 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 being a global payment standard.

We cannot deny that the mechanism design of "digital money houses" is enlightening. Proposals such as 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 "relationship-based trust" mechanisms by traditional underground money houses. However, a systematic payment structure cannot be established solely on vague social trust and localized circulation logic; it must ultimately interface with regulation, making user identity, transaction processes, and sources of funds traceable.

At the same time, we must also view the development direction of encryption 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 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 own financial influence in regions such as the Middle East and Southeast Asia, stablecoins are no longer a marginal financial innovation, but rather a strategic tool actively deployed by the US in international financial competition.

This is also why in the past two years we have seen the promotion of the US dollar stablecoin accelerating comprehensively, from congressional legislation to guidance from the Treasury Department, from participation by traditional banks to integration into payment networks, deeply merging into sovereign currencies and sovereign regulatory frameworks.

So the question arises: can a digital money house payment model support such a strategic system? Clearly not. The essence of the underground money house model is to evade regulation, while what the United States aims to build is a globally embedded financial network with regulation; the digital money house relies on community trust and arbitrage in gray areas, while the USD stablecoin system must be built on compliant financial institutions and a regulatory permission chain.

It is hard to imagine that the U.S. Treasury would hand over 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 the gray areas, but they cannot constitute a sovereign national monetary governance structure. Meanwhile, stablecoins are being endowed with this role.

In other words, the future of the encryption industry will not be one of co-existence with the gray industry. The gray industry supported the encryption industry before it had fully grown, but the approval of the Bitcoin ETF has already ushered the encryption industry into a new cycle, one that is fully integrated and interwoven with traditional finance.

Whether it is some large banks launching their own stablecoin, well-known asset management companies deploying related funds, or mainstream payment companies integrating certain stablecoins,