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Authentication in blockchains - a layman’s guide
As the blockchain ecosystem matures, better and more diversified ways of authenticating for blockchain transactions have emerged. This can be quite overwhelming to newcomers, and so this post aims to put order in the following terms:
- EOA
- MPC
- Account abstraction
- Paymaster
- Relay
- Key abstraction
EOA
EOA stands for Externally Owner Account. This is typically the simplest and original form of authentication: An end user creates a unique, secret, private key which can be held in an app (such as Metamask) or better secured on a hardware wallet (such as Ledger). With that private key the user derives or creates an account on the blockchain. All transactions submitted to the that blockchain account, must be signed with the private key.
EOA private keys are often stored as a “seed phrase”: A series of words from which the private key can be derived.
EOA authentication is the only built-in authentication mechanism which most blockchains (including Ethereum) recognize. All the other methods detailed below build on top or around the EOA method in order to provide additional benefits.
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MPC
MPC stands for Multi Party Computation. It is a technology that allows a private key to be split up into parts (shards) such that the holders of several shards can together produce a valid signature of the private key, regardless of which shards are being used. For example, a private key could be split into 5 shards such that any 2 shards could sign a transaction. This would be annotated a 2/5 scheme - 2 signers needed out of a total of 5. Any 2 shards could be used to sign a transaction with the private key.
MPC has many uses - in this article we will consider the case that a private key is sharded and used to control an EOA. This can be very useful for a variety of cases:
- The account is owned by more than one person (e.g. a company) and every transaction needs to be validated by several people
- A user is worried about losing access to their account; they could store additional shards as backups, such that even if one shard is compromised, it will not risk the account being compromised
- One or more of the signing shards would be owned by an automated service that would enforce policies on the account. For example, if an account has $1m in assets, the policy could prevent sending all of that amount, instead allowing only $10k to be sent out on any given day
Examples of MPC-based platforms include Fireblocks, a wallet infrastructure service, and Zengo, a non-custodial wallet.
While MPC is very useful for securing accounts, it still requires all related users to hold a shard with a very specific and technically involved signing scheme. For instance, each of these shards would likely require a “seed phrase” to be memorized and input into an app, in order to sign payloads.
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Account Abstraction
The best user experience for authentication should resemble the one users are already accustomed to. Users typically use usernames and passwords, sign in with Google/Apple, have 2FA (2-factor authentication) methods set up, and more recently leverage passkeys. Account abstraction aims to allow users to continue using all of these options.
Instead of using an EOA account that must use a specific signature, the user could deploy a smart contract that would serve as their account. The smart contract is set up to validate a given authentication, such as sign-in with Google.
Sign-in with Google (and all the other authentication methods) can be used to sign transactions. The smart contract will accept any transaction, verify its signature, and if valid - will execute it.
This greatly improves authentication experience for end-users. However, blockchains like Ethereum do not have a concept of calling externally into a smart contract. There always needs to be an initial signed transaction from an EOA. That EOA also needs to pay the computation fee (”gas”) of the transaction - so account abstraction transactions cannot be submitted from outside the blockchain.
To solve that, we need some service to submit these transactions on our behalf, which we call a relay.
Relay & Paymaster
A relay accepts a transaction and executes it on behalf of another party. Typically, relays will ask for a small fee for that service. The relay usually also want to claim back gas fees, which can be paid back to them by the user, or the user might have a service they top up with gas to be used by the relay for the execution, called a Paymaster.
Two important notes about the operation of relays:
- A relay cannot change the user’s transaction. There is very little risk giving the transaction to the relay, since it is signed by the user. Any attempt to change the transaction will invalidate the signature, and the relay is not able to authenticate with the user’s credentials in order to re-sign the transaction. The only risk a relay can pose is by not submitting the transaction (often called censoring the user).
- A relay can use any EOA to submit this transaction. The EOA itself does not need to be known to the user’s account abstraction contract. That smart contract will accept a call from anyone, as long as a signed payload is provided.
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Key abstraction
A lesser-known concept, but important to understand, is key abstraction. It is an alternative to account abstraction.
While account abstraction is an immense improvement in the UX, it is not very efficient because more processing happens onchain, consuming more gas. Furthermore, some on-chain services, especially on Ethereum, do not work well with account abstraction contracts for technical reasons.
It would have been nice if there was a way to use sign-in with Google (or any other auth method) in order to operate an EOA account. Some newer blockchains actually allow that, but even for the existing ones, there is a solution in the form of key abstraction platforms.
A key abstraction platform will securely store an EOA private key, and only allow access to it via another authentication method (such as sign-in with Google). This means the user authenticates the way they want, and under the hood that signature could be replaced with an EOA-compatible signature in order to submit the transaction.
But how can the a platform “securely store” the EOA private key without risking it falling in the wrong hands?
One way to do that is to use TEE (trusted execution environments). These are containers hosted in a very specific way (such as Amazon Nitro containers) that verify that they match exactly some pre-vetted container image and cannot be changed. The user can then push a private key into such a container as well as whichever other authentication methods they wish to use, and the container, if set up correctly, will perform this service for them, without leaking any other data outside.
Such platforms already exist - such as Turnkey.
Side note: key abstraction is closely related to the terms embedded wallet and wallet as a service. We plan to explore these terms and clarify them in a future post.
.png)
Final word
We hope this article helped clarify the different components from which a blockchain account system could be built. Do notice that these are not “either-or” solutions. In some cases different components can be used together in one solution.
For instance, MPC and key abstraction can be combined in different ways to create different types of products. The shards of an MPC can each be stored in a key abstraction platform, so that the result is an MPC account, but the authentication is done in whatever method the users want. This can be desirable when operating a shared wallet, or when operating a single-user wallet but not wanting to trust a single TEE with a full signing key.
This space keeps evolving and blockchains are building better authentication primitives to allow for better solutions. We will continue to follow the trends and update you!
As the blockchain ecosystem matures, better and more diversified ways of authenticating for blockchain transactions have emerged. This can be quite overwhelming to newcomers, and so this post aims to put order in the following terms:
- EOA
- MPC
- Account abstraction
- Paymaster
- Relay
- Key abstraction
EOA
EOA stands for Externally Owner Account. This is typically the simplest and original form of authentication: An end user creates a unique, secret, private key which can be held in an app (such as Metamask) or better secured on a hardware wallet (such as Ledger). With that private key the user derives or creates an account on the blockchain. All transactions submitted to the that blockchain account, must be signed with the private key.
EOA private keys are often stored as a “seed phrase”: A series of words from which the private key can be derived.
EOA authentication is the only built-in authentication mechanism which most blockchains (including Ethereum) recognize. All the other methods detailed below build on top or around the EOA method in order to provide additional benefits.
MPC
MPC stands for Multi Party Computation. It is a technology that allows a private key to be split up into parts (shards) such that the holders of several shards can together produce a valid signature of the private key, regardless of which shards are being used. For example, a private key could be split into 5 shards such that any 2 shards could sign a transaction. This would be annotated a 2/5 scheme - 2 signers needed out of a total of 5. Any 2 shards could be used to sign a transaction with the private key.
MPC has many uses - in this article we will consider the case that a private key is sharded and used to control an EOA. This can be very useful for a variety of cases:
- The account is owned by more than one person (e.g. a company) and every transaction needs to be validated by several people
- A user is worried about losing access to their account; they could store additional shards as backups, such that even if one shard is compromised, it will not risk the account being compromised
- One or more of the signing shards would be owned by an automated service that would enforce policies on the account. For example, if an account has $1m in assets, the policy could prevent sending all of that amount, instead allowing only $10k to be sent out on any given day
Examples of MPC-based platforms include Fireblocks, a wallet infrastructure service, and Zengo, a non-custodial wallet.
While MPC is very useful for securing accounts, it still requires all related users to hold a shard with a very specific and technically involved signing scheme. For instance, each of these shards would likely require a “seed phrase” to be memorized and input into an app, in order to sign payloads.
Account Abstraction
The best user experience for authentication should resemble the one users are already accustomed to. Users typically use usernames and passwords, sign in with Google/Apple, have 2FA (2-factor authentication) methods set up, and more recently leverage passkeys. Account abstraction aims to allow users to continue using all of these options.
Instead of using an EOA account that must use a specific signature, the user could deploy a smart contract that would serve as their account. The smart contract is set up to validate a given authentication, such as sign-in with Google.
Sign-in with Google (and all the other authentication methods) can be used to sign transactions. The smart contract will accept any transaction, verify its signature, and if valid - will execute it.
This greatly improves authentication experience for end-users. However, blockchains like Ethereum do not have a concept of calling externally into a smart contract. There always needs to be an initial signed transaction from an EOA. That EOA also needs to pay the computation fee (”gas”) of the transaction - so account abstraction transactions cannot be submitted from outside the blockchain.
To solve that, we need some service to submit these transactions on our behalf, which we call a relay.
Relay & Paymaster
A relay accepts a transaction and executes it on behalf of another party. Typically, relays will ask for a small fee for that service. The relay usually also want to claim back gas fees, which can be paid back to them by the user, or the user might have a service they top up with gas to be used by the relay for the execution, called a Paymaster.
Two important notes about the operation of relays:
- A relay cannot change the user’s transaction. There is very little risk giving the transaction to the relay, since it is signed by the user. Any attempt to change the transaction will invalidate the signature, and the relay is not able to authenticate with the user’s credentials in order to re-sign the transaction. The only risk a relay can pose is by not submitting the transaction (often called censoring the user).
- A relay can use any EOA to submit this transaction. The EOA itself does not need to be known to the user’s account abstraction contract. That smart contract will accept a call from anyone, as long as a signed payload is provided.
Key abstraction
A lesser-known concept, but important to understand, is key abstraction. It is an alternative to account abstraction.
While account abstraction is an immense improvement in the UX, it is not very efficient because more processing happens onchain, consuming more gas. Furthermore, some on-chain services, especially on Ethereum, do not work well with account abstraction contracts for technical reasons.
It would have been nice if there was a way to use sign-in with Google (or any other auth method) in order to operate an EOA account. Some newer blockchains actually allow that, but even for the existing ones, there is a solution in the form of key abstraction platforms.
A key abstraction platform will securely store an EOA private key, and only allow access to it via another authentication method (such as sign-in with Google). This means the user authenticates the way they want, and under the hood that signature could be replaced with an EOA-compatible signature in order to submit the transaction.
But how can the a platform “securely store” the EOA private key without risking it falling in the wrong hands?
One way to do that is to use TEE (trusted execution environments). These are containers hosted in a very specific way (such as Amazon Nitro containers) that verify that they match exactly some pre-vetted container image and cannot be changed. The user can then push a private key into such a container as well as whichever other authentication methods they wish to use, and the container, if set up correctly, will perform this service for them, without leaking any other data outside.
Such platforms already exist - such as Turnkey.
Side note: key abstraction is closely related to the terms embedded wallet and wallet as a service. We plan to explore these terms and clarify them in a future post.
Final word
We hope this article helped clarify the different components from which a blockchain account system could be built. Do notice that these are not “either-or” solutions. In some cases different components can be used together in one solution.
For instance, MPC and key abstraction can be combined in different ways to create different types of products. The shards of an MPC can each be stored in a key abstraction platform, so that the result is an MPC account, but the authentication is done in whatever method the users want. This can be desirable when operating a shared wallet, or when operating a single-user wallet but not wanting to trust a single TEE with a full signing key.
This space keeps evolving and blockchains are building better authentication primitives to allow for better solutions. We will continue to follow the trends and update you!
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Regulatory Radar #4
The recent passage of the U.S. GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins) has sent regulatory ripples across the Atlantic. As the U.S. takes a bold step toward stablecoin regulation, European officials are parsing its implications for the EU's digital finance strategy. This post summarizes the reactions from Brussels and other EU institutions, and what they could signal for the future of transatlantic crypto policy.
Brussels Watches Closely: Strategic Opportunity or Regulatory Risk?
Following the enactment of the GENIUS Act, which establishes a comprehensive framework for the issuance and oversight of U.S. dollar-backed stablecoins, EU officials have been quick to respond. While there’s a broad consensus that regulatory clarity is welcome, reactions across European institutions reflect a blend of strategic caution and competitive awareness.
- European Commission (EC) - Cautious Validation: EC officials welcomed the move in principle. A senior official from DG FISMA noted that the U.S. stablecoin law "reflects a long-overdue commitment to serious digital finance regulation," but cautioned that it may accelerate "regulatory arbitrage pressures in Europe."Internal Commission briefings reportedly highlighted that GENIUS "validates the core logic of MiCA" (the EU’s Markets in Crypto-Assets Regulation) by requiring reserve backing, redemption rights, and prudential oversight for stablecoins. However, there is some concern that the U.S. framework offers "greater operational flexibility" for issuers, which could attract new entrants to the American market.
- European Parliament (EP) - Split views : EP members of the Economic and Monetary Affairs (ECON) Committee were split. Some MEPs praised the GENIUS Act as an important move toward global regulatory convergence. Others, particularly from the Greens and center-left S&D groups, expressed fears that the U.S. might become "a permissive haven" for dollar-denominated stablecoins unless supervision is strictly enforced.
- The GENIUS Act’s multi-issuance provisions — allowing both bank and non-bank entities to issue stablecoins under specific regulatory conditions — were noted with interest in Brussels. Some policymakers view this as a potential competitive advantage for the U.S. system, given MiCA’s more cautious approach to non-bank issuance.
The ECB Sounds the Alarm: dollarization risk
The most vocal critique came from the European Central Bank. ECB board member Piero Cipollone warned in a recent speech that the GENIUS Act could "turbocharge U.S. stablecoin issuance" and lead to "a gradual dollarization of European digital payments." He called for urgent coordination within the eurozone, saying the ECB must *"not be caught off guard by a wave of dollar-linked assets outpacing the digital euro."
President Christine Lagarde echoed these concerns more diplomatically, stating that while the ECB supports responsible innovation, "the risk of monetary fragmentation is real if non-euro stablecoins dominate retail transactions in Europe."This has reignited debate over MiCA’s adequacy in ringfencing the eurozone against foreign digital currency inflows.
The Transatlantic Outlook: Divergence or Dialogue?
The passage of the GENIUS Act is already influencing how EU officials are thinking about future legislation. One tangible impact: renewed calls within the Commission to reassess MiCA’s thresholds on foreign stablecoin issuance. Some voices within the EC are urging a faster rollout of the digital euro to mitigate dependence on dollar-based tokens.
At the same time, there is cautious optimism that GENIUS might revive stalled talks around U.S.-EU cooperation on crypto supervision. European lawmakers have long pressed Washington to deliver a harmonized framework, and now that one exists for stablecoins, there may be momentum to align supervisory practices.
As one senior MEP put it: "MiCA was first. GENIUS is faster. The question now is: can we meet in the middle before market fragmentation gets worse?"
Final Take
The GENIUS Act’s passage marks a pivotal moment in the global race to regulate digital assets. For the EU, it brings both a challenge and an opportunity: to defend the integrity of its digital currency regime while leveraging this moment to deepen international cooperation. Whether the transatlantic stablecoin landscape will converge or diverge may depend as much on political will as on policy architecture.
Stay tuned for more insights in the next edition of Regulatory Radar!
The recent passage of the U.S. GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins) has sent regulatory ripples across the Atlantic. As the U.S. takes a bold step toward stablecoin regulation, European officials are parsing its implications for the EU's digital finance strategy. This post summarizes the reactions from Brussels and other EU institutions, and what they could signal for the future of transatlantic crypto policy.
Brussels Watches Closely: Strategic Opportunity or Regulatory Risk?
Following the enactment of the GENIUS Act, which establishes a comprehensive framework for the issuance and oversight of U.S. dollar-backed stablecoins, EU officials have been quick to respond. While there’s a broad consensus that regulatory clarity is welcome, reactions across European institutions reflect a blend of strategic caution and competitive awareness.
- European Commission (EC) - Cautious Validation: EC officials welcomed the move in principle. A senior official from DG FISMA noted that the U.S. stablecoin law "reflects a long-overdue commitment to serious digital finance regulation," but cautioned that it may accelerate "regulatory arbitrage pressures in Europe."Internal Commission briefings reportedly highlighted that GENIUS "validates the core logic of MiCA" (the EU’s Markets in Crypto-Assets Regulation) by requiring reserve backing, redemption rights, and prudential oversight for stablecoins. However, there is some concern that the U.S. framework offers "greater operational flexibility" for issuers, which could attract new entrants to the American market.
- European Parliament (EP) - Split views : EP members of the Economic and Monetary Affairs (ECON) Committee were split. Some MEPs praised the GENIUS Act as an important move toward global regulatory convergence. Others, particularly from the Greens and center-left S&D groups, expressed fears that the U.S. might become "a permissive haven" for dollar-denominated stablecoins unless supervision is strictly enforced.
- The GENIUS Act’s multi-issuance provisions — allowing both bank and non-bank entities to issue stablecoins under specific regulatory conditions — were noted with interest in Brussels. Some policymakers view this as a potential competitive advantage for the U.S. system, given MiCA’s more cautious approach to non-bank issuance.
The ECB Sounds the Alarm: dollarization risk
The most vocal critique came from the European Central Bank. ECB board member Piero Cipollone warned in a recent speech that the GENIUS Act could "turbocharge U.S. stablecoin issuance" and lead to "a gradual dollarization of European digital payments." He called for urgent coordination within the eurozone, saying the ECB must *"not be caught off guard by a wave of dollar-linked assets outpacing the digital euro."
President Christine Lagarde echoed these concerns more diplomatically, stating that while the ECB supports responsible innovation, "the risk of monetary fragmentation is real if non-euro stablecoins dominate retail transactions in Europe."This has reignited debate over MiCA’s adequacy in ringfencing the eurozone against foreign digital currency inflows.
The Transatlantic Outlook: Divergence or Dialogue?
The passage of the GENIUS Act is already influencing how EU officials are thinking about future legislation. One tangible impact: renewed calls within the Commission to reassess MiCA’s thresholds on foreign stablecoin issuance. Some voices within the EC are urging a faster rollout of the digital euro to mitigate dependence on dollar-based tokens.
At the same time, there is cautious optimism that GENIUS might revive stalled talks around U.S.-EU cooperation on crypto supervision. European lawmakers have long pressed Washington to deliver a harmonized framework, and now that one exists for stablecoins, there may be momentum to align supervisory practices.
As one senior MEP put it: "MiCA was first. GENIUS is faster. The question now is: can we meet in the middle before market fragmentation gets worse?"
Final Take
The GENIUS Act’s passage marks a pivotal moment in the global race to regulate digital assets. For the EU, it brings both a challenge and an opportunity: to defend the integrity of its digital currency regime while leveraging this moment to deepen international cooperation. Whether the transatlantic stablecoin landscape will converge or diverge may depend as much on political will as on policy architecture.
Stay tuned for more insights in the next edition of Regulatory Radar!
The Great Fintech Migration: Why Every Payment Company Will Run on Stablecoins
Forward-thinking payment companies are rebuilding their infrastructure for the next decade of financial services
In February 2025, Stripe paid $1.1 billion for Bridge. Three weeks later, Visa announced stablecoin card partnerships across six Latin American countries. Last month, Mastercard launched end-to-end stablecoin processing with major crypto platforms. Last week, Stripe doubled down with the acquisition of Privy.
Stablecoin networks have quietly grown to process $27.6 trillion in annual volume - outpacing Visa and Mastercard combined.
Stablecoin infrastructure is faster and cheaper, and companies are using it to fundamentally rebuild payment infrastructure for the next decade of financial services. The great fintech migration isn't coming. It's here.
Forward-thinking companies are making the transition now
The numbers tell a story of unprecedented acceleration. In the past six months alone:
- Stripe completed their largest acquisition frenzy ever, securing stablecoin infrastructure
- RedotPay raised $40 million to expand crypto card programs globally
- MoonPay acquired Iron for $100+ million to compete with Stripe
- PayPal announced PayPal USD (PYUSD) expansion to Stellar network, targeting remittances and "PayFi" solutions for their 400+ million users
- Nubank partnered with Lightspark to integrate Bitcoin Lightning Network for their 100+ million customers across Latin America
This is a land grab for infrastructure that will power payments for the next decade. Stablecoin supply grew 59% in 2024 alone, with companies like Starlink using stablecoins to repatriate funds from international operations.
The scale and speed of these moves signal that stablecoin infrastructure has reached a tipping point.
The hidden crisis of legacy payment infrastructure
Every payment company will eventually migrate to stablecoin infrastructure. While some debate the merits of moving onchain, others are already processing billions in stablecoin volume and unlocking cost advantages today.
The companies making this transition first understand something crucial: this isn't about replacing existing systems overnight. It's about building the foundational infrastructure that can support the next decade of financial services.
Legacy payment rails carry deep, structural inefficiencies - what we call the "Money Prison." Capital gets trapped in transit between financial institutions, creating friction that erodes profitability and user experience. The pain points are systemic:
1. Capital trapped in motion
Consider a typical cross-border payment. When a business in New York sends $50,000 to a supplier in Singapore, that money begins a multi-day journey through correspondent banks, clearing houses, and regulatory checkpoints. Each step introduces delays, fees, and failure points. These delays are not just inconvenient—they're expensive. Slow settlement processes cost institutions $100 billion annually, while global corporations lose $120 billion annually in cross-border fees. Companies like Wise have optimized the costs for some major corridors by netting the transfers they have to execute, although this is also very capital-intensive.
2. Capital locked in collateral
Money doesn't move 24/7 instantly in traditional banking systems. This creates counterparty risk during settlement windows. Companies need to maintain collateral and pre-funded accounts to cover these gaps. This capital sits idle instead of being deployed productively.
3. The reconciliation nightmare
Finance teams spend 30% of their time manually matching financial records across unsynchronized systems including banks, card networks, payment processors, and accounting platforms. These discrepancies are the result of outdated infrastructure that was never designed to operate in real-time.
The stablecoin infrastructure advantage
Forward-thinking payment companies are discovering a different approach:
→ 24/7/365 settlement capabilities
Unlike traditional banking systems that operate on business hours and batch processing schedules, stablecoin networks never sleep. A payment initiated at 11 PM on Christmas Day settles with the same speed and reliability as one sent during peak business hours.
→ Programmable money flows
Smart contracts can automate complex payment logic that currently requires manual intervention. Unlike traditional systems that require separate agreements and integrations for each payment rule, smart contracts can execute multi-party splits, conditional releases, and escrow arrangements automatically without intermediaries.
→ Global reach without correspondent banking
Traditional cross-border payments require relationships with correspondent banks in each jurisdiction - relationships that come with compliance costs and operational complexity. Stablecoin infrastructure provides direct settlement without intermediaries.
→ Transparent, auditable transaction history
Every transaction on a blockchain creates an immutable audit trail - one single source of truth that eliminates reconciliation nightmares. Instead of matching records across multiple systems, everyone looks at the same blockchain ledger. This dramatically reduces dispute resolution time and costs while providing real-time visibility into payment flows.
→ Direct crypto spending through cards
The missing piece has been enabling real-world spending. While stablecoins excel at B2B transfers and cross-border payments, consumers need a familiar way to spend without cumbersome off-ramping processes.
Crypto cards solve this by connecting stablecoin wallets directly to existing payment networks. Kulipa provides this functionality to wallets and PayFi apps, bridging on-chain balances with traditional card networks like Visa and Mastercard.
Crypto cards eliminate the multi-step conversion process that previously kept crypto in a separate financial universe from daily commerce - no more transferring to exchanges, converting to fiat, then withdrawing to bank accounts. Visa has settled over $225 million in stablecoin transactions using Solana and Ethereum networks, proving this direct spending approach works at scale. Users can now spend stablecoins anywhere traditional cards are accepted through familiar interfaces.
The complete infrastructure transformation
Why are industry leaders like Stripe and MoonPay investing billions in stablecoin infrastructure? The answer lies in the fundamental limitations of current payment architecture.
Traditional payment systems require separate integrations and capital requirements for different payment products (access to US bonds, PE funds, high-risk debt etc). Stablecoin infrastructure helps reduce operational complexity while making it easy to launch these new payment products.
The current acquisition frenzy reflects this strategic shift. Companies aren't just buying technology - they're positioning themselves to operate with fundamentally different payment architecture while maintaining familiar user experiences. The goal is to combine on-chain settlement efficiency with interfaces users already trust, so customers get faster, cheaper, more transparent payments without needing to understand blockchain technology.
Whether this approach delivers the anticipated benefits remains to be seen, but the scale of investment suggests industry leaders believe the transition is inevitable.
The cost of waiting
We're at an inflection point for fintechs. Customers increasingly expect seamless financial experiences. Companies building on traditional banking rails face settlement delays and operational inefficiencies that become more costly as stablecoin infrastructure demonstrates superior performance.
The most successful fintechs are responding by rebuilding their core infrastructure around stablecoin settlement while partnering with specialized providers to offer complete solutions. This approach addresses both backend efficiency gains and frontend user expectations without requiring companies to build everything in-house.
The window to make this transition is narrowing. As regulatory frameworks solidify and major payment networks accelerate their crypto integrations, fintechs who act now can offer their users complete financial sovereignty, combining the operational efficiency of stablecoin infrastructure with the spending capabilities users demand.
The great fintech migration has begun. The question is whether your platform will become a complete on-chain product built around stablecoins or remain constrained by legacy systems and limited user capabilities.
Forward-thinking payment companies are rebuilding their infrastructure for the next decade of financial services
In February 2025, Stripe paid $1.1 billion for Bridge. Three weeks later, Visa announced stablecoin card partnerships across six Latin American countries. Last month, Mastercard launched end-to-end stablecoin processing with major crypto platforms. Last week, Stripe doubled down with the acquisition of Privy.
Stablecoin networks have quietly grown to process $27.6 trillion in annual volume - outpacing Visa and Mastercard combined.
Stablecoin infrastructure is faster and cheaper, and companies are using it to fundamentally rebuild payment infrastructure for the next decade of financial services. The great fintech migration isn't coming. It's here.
Forward-thinking companies are making the transition now
The numbers tell a story of unprecedented acceleration. In the past six months alone:
- Stripe completed their largest acquisition frenzy ever, securing stablecoin infrastructure
- RedotPay raised $40 million to expand crypto card programs globally
- MoonPay acquired Iron for $100+ million to compete with Stripe
- PayPal announced PayPal USD (PYUSD) expansion to Stellar network, targeting remittances and "PayFi" solutions for their 400+ million users
- Nubank partnered with Lightspark to integrate Bitcoin Lightning Network for their 100+ million customers across Latin America
This is a land grab for infrastructure that will power payments for the next decade. Stablecoin supply grew 59% in 2024 alone, with companies like Starlink using stablecoins to repatriate funds from international operations.
The scale and speed of these moves signal that stablecoin infrastructure has reached a tipping point.
The hidden crisis of legacy payment infrastructure
Every payment company will eventually migrate to stablecoin infrastructure. While some debate the merits of moving onchain, others are already processing billions in stablecoin volume and unlocking cost advantages today.
The companies making this transition first understand something crucial: this isn't about replacing existing systems overnight. It's about building the foundational infrastructure that can support the next decade of financial services.
Legacy payment rails carry deep, structural inefficiencies - what we call the "Money Prison." Capital gets trapped in transit between financial institutions, creating friction that erodes profitability and user experience. The pain points are systemic:
1. Capital trapped in motion
Consider a typical cross-border payment. When a business in New York sends $50,000 to a supplier in Singapore, that money begins a multi-day journey through correspondent banks, clearing houses, and regulatory checkpoints. Each step introduces delays, fees, and failure points. These delays are not just inconvenient—they're expensive. Slow settlement processes cost institutions $100 billion annually, while global corporations lose $120 billion annually in cross-border fees. Companies like Wise have optimized the costs for some major corridors by netting the transfers they have to execute, although this is also very capital-intensive.
2. Capital locked in collateral
Money doesn't move 24/7 instantly in traditional banking systems. This creates counterparty risk during settlement windows. Companies need to maintain collateral and pre-funded accounts to cover these gaps. This capital sits idle instead of being deployed productively.
3. The reconciliation nightmare
Finance teams spend 30% of their time manually matching financial records across unsynchronized systems including banks, card networks, payment processors, and accounting platforms. These discrepancies are the result of outdated infrastructure that was never designed to operate in real-time.
The stablecoin infrastructure advantage
Forward-thinking payment companies are discovering a different approach:
→ 24/7/365 settlement capabilities
Unlike traditional banking systems that operate on business hours and batch processing schedules, stablecoin networks never sleep. A payment initiated at 11 PM on Christmas Day settles with the same speed and reliability as one sent during peak business hours.
→ Programmable money flows
Smart contracts can automate complex payment logic that currently requires manual intervention. Unlike traditional systems that require separate agreements and integrations for each payment rule, smart contracts can execute multi-party splits, conditional releases, and escrow arrangements automatically without intermediaries.
→ Global reach without correspondent banking
Traditional cross-border payments require relationships with correspondent banks in each jurisdiction - relationships that come with compliance costs and operational complexity. Stablecoin infrastructure provides direct settlement without intermediaries.
→ Transparent, auditable transaction history
Every transaction on a blockchain creates an immutable audit trail - one single source of truth that eliminates reconciliation nightmares. Instead of matching records across multiple systems, everyone looks at the same blockchain ledger. This dramatically reduces dispute resolution time and costs while providing real-time visibility into payment flows.
→ Direct crypto spending through cards
The missing piece has been enabling real-world spending. While stablecoins excel at B2B transfers and cross-border payments, consumers need a familiar way to spend without cumbersome off-ramping processes.
Crypto cards solve this by connecting stablecoin wallets directly to existing payment networks. Kulipa provides this functionality to wallets and PayFi apps, bridging on-chain balances with traditional card networks like Visa and Mastercard.
Crypto cards eliminate the multi-step conversion process that previously kept crypto in a separate financial universe from daily commerce - no more transferring to exchanges, converting to fiat, then withdrawing to bank accounts. Visa has settled over $225 million in stablecoin transactions using Solana and Ethereum networks, proving this direct spending approach works at scale. Users can now spend stablecoins anywhere traditional cards are accepted through familiar interfaces.
The complete infrastructure transformation
Why are industry leaders like Stripe and MoonPay investing billions in stablecoin infrastructure? The answer lies in the fundamental limitations of current payment architecture.
Traditional payment systems require separate integrations and capital requirements for different payment products (access to US bonds, PE funds, high-risk debt etc). Stablecoin infrastructure helps reduce operational complexity while making it easy to launch these new payment products.
The current acquisition frenzy reflects this strategic shift. Companies aren't just buying technology - they're positioning themselves to operate with fundamentally different payment architecture while maintaining familiar user experiences. The goal is to combine on-chain settlement efficiency with interfaces users already trust, so customers get faster, cheaper, more transparent payments without needing to understand blockchain technology.
Whether this approach delivers the anticipated benefits remains to be seen, but the scale of investment suggests industry leaders believe the transition is inevitable.
The cost of waiting
We're at an inflection point for fintechs. Customers increasingly expect seamless financial experiences. Companies building on traditional banking rails face settlement delays and operational inefficiencies that become more costly as stablecoin infrastructure demonstrates superior performance.
The most successful fintechs are responding by rebuilding their core infrastructure around stablecoin settlement while partnering with specialized providers to offer complete solutions. This approach addresses both backend efficiency gains and frontend user expectations without requiring companies to build everything in-house.
The window to make this transition is narrowing. As regulatory frameworks solidify and major payment networks accelerate their crypto integrations, fintechs who act now can offer their users complete financial sovereignty, combining the operational efficiency of stablecoin infrastructure with the spending capabilities users demand.
The great fintech migration has begun. The question is whether your platform will become a complete on-chain product built around stablecoins or remain constrained by legacy systems and limited user capabilities.