Introduction
This article primarily explores the complexity of traditional payment systems and how Cryptorails, a crypto payment system, emerges as a more efficient alternative. It highlights the limitations of traditional payment networks (such as card payments, ACH, and wire transfers) in terms of settlement time, cost, and international payments. The article also emphasizes how innovations like stablecoins, DeFi, crypto wallets, and clearer regulations are driving the maturation of crypto payments.
When Satoshi Nakamoto released the Bitcoin whitepaper in 2009, the vision was to use cryptographic networks for payments, enabling them to flow freely on the internet like information. Although the direction was correct, the technology, economic models, and ecosystem at the time were not suitable for commercializing the use case.
By 2025, the market has witnessed the convergence of several key innovations and developments that make this vision inevitable: stablecoins have been widely adopted by consumers and businesses; market makers and OTC desks can now easily hold stablecoins on their balance sheets; DeFi applications have created a robust on-chain financial infrastructure; there are numerous on-ramps and off-ramps globally; block space is faster and cheaper; embedded wallets have simplified user experiences; and clearer regulatory frameworks have reduced uncertainty.
There is now an excellent opportunity to build a new generation of payment companies that leverage "Cryptorails" to achieve significantly better economic efficiencies than traditional systems, which are burdened by multiple rent-seeking intermediaries and outdated infrastructure. These Cryptorails are becoming the backbone of a parallel financial system that operates in real-time, 24/7, and is inherently global.
This article will:
Explain the key components of the traditional financial system
Outline the main use cases of Cryptorails
Discuss the challenges hindering further adoption
Share predictions for the market outlook in five years
It is worth noting that currently, approximately 280 payment companies are building on Cryptorails.
Understanding the Complexity of Traditional Payment Systems
To understand the significance of Cryptorails, it is essential to first grasp the key concepts of existing payment rails and the complex market structure and system architecture in which they operate.
Card Networks
While the topology of Card Networks is complex, the key participants in a transaction have remained unchanged over the past 70 years. Essentially, card payments involve four main parties:
Merchants
Cardholders
Issuing Banks
Acquiring Banks
The first two are straightforward, but the latter two require explanation.
Issuing banks, or issuers, provide customers with credit or debit cards and authorize transactions. When a transaction request is made, the issuing bank checks the cardholder's account balance, available credit, and other factors to decide whether to approve it. Credit cards essentially borrow funds from the issuing institution, while debit cards transfer funds directly from the customer's account.
If a merchant wants to accept credit card payments, they need an acquirer (which can be a bank, processor, gateway, or independent sales organization) that is an authorized member of the card network.
The card network itself provides the channels and rules for credit card payments. It connects acquiring banks with issuing banks, offers clearing functions, sets participation rules, and determines transaction fees. ISO 8583 remains the primary international standard, defining how network participants construct and exchange credit card payment information (such as authorization, settlement, and refunds). In the network environment, issuing banks and acquiring banks act as their distributors—the issuing banks are responsible for distributing more cards to users, while acquiring banks are responsible for distributing as many card terminals and payment gateways to merchants as possible so that they can accept card payments.
Additionally, there are two types of card networks: "open-loop" and "closed-loop." Open-loop networks like Visa and Mastercard involve multiple parties: issuing banks, acquiring banks, and the card network itself. The card network facilitates communication and transaction routing but acts more like a marketplace, relying on financial institutions to issue cards and manage customer accounts. Only banks are allowed to issue cards for open-loop networks. Each debit or credit card has a Bank Identification Number (BIN), provided by Visa to banks. Non-bank entities like PayFacs need a "BIN sponsor" to issue cards or process transactions.
In contrast, closed-loop networks like American Express are self-sufficient, with a single company handling all aspects of the transaction process—issuing its own cards, owning its own bank, and providing its own merchant acquiring services. Closed-loop systems offer more control and better profits but at the cost of more limited merchant acceptance. Conversely, open-loop systems provide wider adoption but at the cost of control and revenue sharing among participants.
The Economics of Payments
The economics of payments are complex, with multiple layers of fees within the network. The interchange fee is a portion of the payment fee charged by the issuing bank to provide access to its customers. Although technically the acquiring bank pays the interchange fee, the cost is usually passed on to the merchant. Card networks typically set interchange fees, which account for the majority of the total payment cost. These fees vary significantly across regions and transaction types. For example, in the U.S., consumer credit card fees range from ~1.2% to ~3%, while in the EU, the cap is 0.3%. There are also settlement fees, which are paid to the acquiring institution, usually a percentage of the transaction settlement amount or volume.
While these are the most important participants in the value chain, the reality is that today's market structure is much more complex in practice:
Although not all participants will be introduced, several important ones are worth noting:
Payment Gateways: Encrypt and transmit payment information, connect with payment processors and acquiring banks to obtain authorization, and communicate transaction approvals or rejections to businesses in real-time.
Payment Processors: Handle payments on behalf of acquiring banks. They forward transaction details from the gateway to the acquiring bank, which then communicates with the issuing bank through the card network to obtain authorization. The processor receives the authorization response and sends it back to the gateway to complete the transaction. It also handles settlement, the process by which funds actually enter the merchant's bank account. Typically, businesses send a batch of authorized transactions to the processor, which submits them to the acquiring bank to initiate the fund transfer from the issuing bank to the merchant's account.
Payment Facilitators (PayFacs) or Payment Service Providers (PSPs): Pioneered by PayPal and Square around 2010, they act as mini payment processors between merchants and acquiring banks. They effectively serve as aggregators, bundling many smaller merchants into their system to achieve economies of scale and simplify operations by managing cash flows, processing transactions, and ensuring payments. PayFacs hold merchant IDs on card networks and assume compliance (e.g., anti-money laundering laws) and underwriting responsibilities on behalf of the merchants they work with.
Orchestration Platforms: A middleware technology layer that simplifies and optimizes merchants' payment processes. It connects to multiple processors, gateways, and acquiring banks through a single API, improving transaction success rates, reducing costs, and enhancing performance by routing payments based on factors such as location or fees.
ACH (Automated Clearing House)
The ACH is one of the largest payment networks in the U.S., effectively owned by the banks that use it. It was initially established in the 1970s but gained widespread adoption when the U.S. government began using it to distribute Social Security benefits, encouraging banks across the country to join the network. Today, it is widely used for payroll, bill payments, and B2B transactions.
There are two main types of ACH transactions: "push" payments (you send money) and "pull" payments (someone takes money with your permission). When you receive your salary via direct deposit or pay bills online using your bank account, you are using the ACH network. The process involves multiple participants: the company or individual initiating the payment (the originator), their bank (the ODFI), the receiving bank (the RDFI), and the operator that acts as the traffic controller for all these transactions. In the ACH process, the originator submits the transaction to the ODFI, which then sends the transaction to the ACH operator. The operator subsequently routes the transaction to the RDFI. At the end of each day, the operator calculates the net settlement total for its member banks (with the Federal Reserve managing the actual settlement).
Risk Management in ACH
One of the most important aspects of ACH is risk management. When a company initiates an ACH payment, its bank (the ODFI) is responsible for ensuring everything is legitimate. This is especially crucial for pull payments—imagine someone using your bank account information without permission. To prevent this, regulations allow disputes to be raised within 60 days of receiving a statement. Companies like PayPal have developed clever verification methods, such as making small test deposits to confirm account ownership.
The ACH system has been trying to meet modern demands. In 2015, they introduced "Same-Day ACH," allowing faster payment processing. However, it still relies on batch processing rather than real-time transfers and has limitations. For example, you cannot send more than $25,000 in a single transaction, and it is not suitable for international payments.
Wire Transfers
Wire transfers are the backbone of high-value payment processing, with two main systems in the U.S.: Fedwire and CHIPS. These systems handle time-sensitive, immediately settled, and secured payments, such as securities transactions, major business deals, and real estate purchases. Once executed, wire transfers are usually irrevocable and cannot be canceled or reversed without the recipient's consent. Unlike conventional payment networks that batch process transactions, modern wire systems use Real-Time Gross Settlement (RTGS), meaning each transaction is settled individually as it occurs. This is an important feature because the systems handle trillions of dollars daily, and the risk of intra-day bank failures using traditional net settlement is too high.
Fedwire is an RTGS transfer system that allows participating financial institutions to send and receive same-day fund transfers. When a business initiates a wire transfer, its bank verifies the request, deducts the amount from the account, and sends a message to Fedwire. Then, the Federal Reserve bank immediately deducts the amount from the remitting bank's account and credits it to the receiving bank's account, which subsequently deposits the funds into the final recipient's account. The system operates from 9 p.m. the previous day to 7 p.m. Eastern Time, closing on weekends and holidays.
CHIPS, owned by large U.S. banks through a clearinghouse, is smaller in scale and serves only a few major banks. Unlike Fedwire's RTGS method, CHIPS is a net settlement engine, meaning the system allows multiple payments between the same parties to be aggregated. For example, if Alice wants to send Bob $10 million and Bob wants to send Alice $2 million, CHIPS will combine these into a single $8 million payment from Alice to Bob. Although this means CHIPS payments take longer than real-time transactions, most payments are still settled within the day.
Complementing these systems is SWIFT, which is not a payment system but a global messaging network for financial institutions. It is a member-owned cooperative with shareholders representing over 11,000 member organizations. SWIFT enables banks and securities firms worldwide to exchange secure, structured messages, many of which initiate payment transactions across various networks. According to Statrys, SWIFT transfers typically take about 18 hours to complete.
In the general process, the remitter instructs their bank to send a wire transfer to the recipient. Below is the value chain in a simple scenario where both banks belong to the same wire transfer network.
In more complex cases, especially for cross-border payments, transactions need to be executed through correspondent banking relationships, often coordinated by SWIFT.
Use Cases for Cryptorails
With a basic understanding of traditional channels, let's now explore the advantages of Cryptorails.
Cryptorails is most effective in situations where traditional U.S. dollar access is restricted but demand for dollars is high. Think of places where people want dollars for value preservation but cannot easily obtain traditional U.S. dollar bank accounts. These countries are typically those with economic instability, high inflation, currency controls, or underdeveloped banking systems, such as Argentina, Venezuela, Nigeria, Turkey, and Ukraine. Additionally, compared to most other currencies, the U.S. dollar is a superior store of value, and consumers and businesses often prefer it because it can be easily used as a medium of exchange or converted into local fiat at point of sale.
The advantages of Cryptorails are also most evident in global payment scenarios because crypto networks have no borders. They rely on the existing internet infrastructure to provide global coverage. According to World Bank data, there are currently 92 RTGS (Real-Time Gross Settlement) systems in operation globally, each typically owned by respective central banks. While they are well-suited for domestic payments within these countries, the issue is that they cannot "talk to each other." Cryptorails can act as the glue between these different systems and can also be extended to countries that do not have these systems.
Cryptorails are also best suited for payments with a certain degree of urgency or a higher time preference. This includes cross-border supplier payments and foreign aid disbursements. They are also helpful in channels where correspondent banking networks are particularly inefficient. For example, despite geographical proximity, remittances from Mexico to the U.S. are actually more difficult than from Hong Kong to the U.S. Even in developed countries like the U.S. to Europe, payments typically go through four or more correspondent banks.
On the other hand, for domestic transactions in developed countries, especially where card usage is high or real-time payment systems already exist, the attractiveness of Cryptorails is lower. For example, intra-European payments flow smoothly through SEPA, and the stability of the euro eliminates the need for a U.S. dollar-denominated alternative.
Merchant Adoption
Merchant adoption can be divided into two distinct use cases: front-end integration and back-end integration. On the front end, merchants can directly accept cryptocurrencies as payment from customers. Although one of the oldest use cases, it historically had little transaction volume because few people held cryptocurrencies, even fewer wanted to spend them, and those who did had limited options. Today, the market is different because more people hold crypto assets, including stablecoins, and an increasing number of merchants accept them as payment options to reach a new customer base and ultimately sell more goods and services.
From a geographical perspective, most transaction volumes come from businesses selling products to consumers in early-adopter countries of cryptocurrencies, which are typically emerging markets like Vietnam and India. From the merchant's perspective, most demand comes from online gambling and retail stock brokerage companies that want to reach emerging markets, Web2 and Web3 markets (such as watch suppliers and content creators), and betting games (such as fantasy sports and lottery activities).
The "front-end" merchant acceptance process typically looks like this:
A PSP (Payment Service Provider) usually creates a wallet for the merchant after KYC/KYB (Know Your Customer/Know Your Business).
The customer sends cryptocurrency to the PSP.
The PSP converts the cryptocurrency to fiat currency through liquidity providers or stablecoin issuers and sends the funds to the merchant's local bank account, possibly using other authorized partners.
The main psychological challenge blocking further adoption of this use case is that cryptocurrencies do not seem "real" to many people. There are two main user personas to address: one that does not care about the value and wants to keep everything as magical internet money, and another that is pragmatic and wants to deposit funds directly into the bank.
Additionally, in the U.S., consumer adoption of cryptocurrencies is more difficult because credit cards effectively pay consumers 1-5% cashback on purchases. Attempts to persuade merchants to promote cryptocurrency payments directly to consumers as an alternative to credit cards have not been successful thus far. Merchant Customer Exchange was launched in 2012 and failed in 2016 because it could not kickstart consumer adoption. In other words, it is difficult for merchants to directly incentivize users to switch from card payments to crypto assets because payments are already "free" for consumers, so the value proposition needs to be addressed at the consumer level first.
On the back end, Cryptorails can offer merchants faster settlement times and access to funds. Settlements with Visa and Mastercard can take 2-3 days, American Express up to 5 days, and international settlements even longer—such as approximately 30 days in Brazil. In some use cases, such as marketplaces like Uber, merchants may need to pre-fund their bank accounts to make payments before settlement. In contrast, people can effectively fund in via credit card, transfer funds on-chain, and deposit directly into the merchant's bank account in local currency. With less capital tied up during the transfer process, this flow not only improves working capital but also allows merchants to further improve capital management by freely and instantaneously exchanging between digital dollars and yield assets (such as tokenized U.S. Treasury bonds).
Specifically, the "back-end" merchant acceptance process might look like this:
The customer enters card information to complete the transaction.
The PSP creates a wallet for the customer, who funds the wallet using an entry point that accepts traditional payment methods.
The credit card transaction purchases USDC, which is then sent from the customer's wallet to the merchant's wallet.
The PSP can opt to transfer funds T+0 (i.e., same day) into the merchant's bank account through native channels.
The PSP typically receives funds from the acquiring bank within T+1 or T+2 (i.e., 1-2 days).
Debit Cards
The ability to link debit cards directly to non-custodial smart contract wallets creates a powerful bridge between blockchain space and the real world, driving organic adoption among different user personas. In emerging markets, these cards are becoming a primary consumption tool, increasingly replacing traditional banking. Interestingly, even in countries with stable currencies, consumers are using these cards to gradually build up dollar savings while avoiding foreign exchange fees at the point of purchase. High-net-worth individuals are also increasingly using these crypto-linked debit cards as an effective tool for spending USDC globally.
Debit cards are more attractive than credit cards for two reasons: they face fewer regulatory restrictions (e.g., MCC 6051 is outright rejected in capital-controlled countries like Pakistan and Bangladesh), and they carry lower fraud risks because settled crypto transactions cannot be refunded, which would pose serious liability issues for credit cards.
In the long run, cards bound to crypto wallets used for mobile payments may actually be the best way to combat fraud because of biometric authentication on mobile devices: scan your face, make a purchase, and recharge your wallet from your bank account.
Remittances
Remittances refer to the process of people who move abroad for work and want to send money back home. According to World Bank data, the total amount of remittances in 2023 was approximately $656 billion, equivalent to the GDP of Belgium.
Traditional remittance systems are costly. On average, the fee for cross-border remittances is 6.4% of the transfer amount, but these fees can vary significantly—from 2.2% for transfers from Malaysia to India (even lower for high-volume corridors like the U.S. to India). Banks typically charge the highest fees, around 12%, while remittance operators (MTOs) like MoneyGram have an average charge of 5.5%.
Cryptorails can offer a faster and cheaper alternative for remittances. The growth of companies using Cryptorails largely depends on the broader remittance market size, with the highest transaction volumes being from the U.S. to Latin America (especially Mexico, Argentina, and Brazil), the U.S. to India, and the U.S. to the Philippines. A key driver of this development is non-custodial embedded wallets like Privy, which offer a Web2-level user experience.
The process for remittances using Cryptorails might look like this:
The sender enters the PSP (Payment Service Provider) via bank account, debit card, credit card, or directly to an on-chain address; if the sender does not have a wallet, one will be created for them.
The PSP converts USDT/USDC into the recipient's local currency, either directly or through market makers or OTC partners.
The PSP pays the fiat currency directly into the recipient's bank account or through a local payment gateway; alternatively, the PSP can first generate an non-custodial wallet for the recipient to claim funds, giving them the option to keep it on-chain.
In many cases, the recipient needs to complete KYC before receiving funds.
That said, the path to launching crypto remittance projects remains challenging. One issue is that it is often necessary to incentivize people to switch from MTOs (remittance operators), which can be expensive. Another issue is that most transfers on Web2 payment apps are already free, so local transfers alone are insufficient to overcome the network effects of existing apps. Finally, although the on-chain transfer component works well, there is still a need to interact with TradFi (traditional finance) at the "edges," so cost and friction may ultimately lead to the same or even worse issues. In particular, payment gateways that convert to local fiat currency and pay through methods such as mobile or self-service terminals will capture the largest profits.
B2B Payments
Cross-border (XB) B2B payments are one of the most promising applications for Cryptorails. Payments through correspondent banking systems can take weeks to settle, and in some extreme cases, even longer—one founder mentioned it took 2.5 months to send supplier payments from Africa to Asia. For example, a cross-border payment from Ghana to Nigeria (two neighboring countries) can take weeks and incur transfer fees as high as 10%.
Moreover, cross-border settlements are slow and costly for PSPs (Payment Service Providers). For companies like Stripe that make payments, it can take up to a week to pay international merchants, and they must lock up capital to cover fraud and refund risks. Shortening the conversion cycle would free up significant working capital.
Cryptorails has gained significant traction in B2B XB payments, primarily because merchants care more about fees than consumers. Reducing transaction costs by 0.5-1% may not sound like much, but when transaction volumes are high, especially for businesses with thin margins, the savings can be substantial. Additionally, speed matters. Completing payments in hours rather than days or weeks has a significant impact on a company's working capital. Moreover, compared to consumers who expect a smooth experience, businesses are more tolerant of a worse user experience and more complex processes.
At the same time, the cross-border payment market is vast—estimates vary widely, but according to McKinsey data, the cross-border payment market generated approximately $240 billion in revenue in 2022, with transaction volumes around $150 trillion. That said, building a sustainable business remains challenging. Although the "stablecoin sandwich"—exchanging local currency for stablecoins and back again—is definitely faster, it is also expensive because foreign exchange conversions on both sides erode profits. While some companies have tried to solve this by establishing internal market-making departments, it is very costly and difficult to scale. Additionally, customers are concerned about regulation and risk, requiring significant education. That said, as stablecoin legislation opens the door for more businesses to hold and use digital dollars, foreign exchange costs may rapidly decline in the next two years. With more on-ramps and off-ramps and token issuers having direct banking relationships, they will be able to effectively offer wholesale foreign exchange rates at internet scale.
XB Supplier Payments
For B2B payments, the majority of cross-border transactions revolve around supplier import payments, typically with buyers in the U.S., Latin America, or Europe and suppliers in Africa or Asia. These channels are particularly troublesome because the local channels in these countries are underdeveloped, and companies struggle to access them because they cannot find local banking partners. Cryptorails can also help alleviate specific pain points in certain countries. For example, in Brazil, you cannot use traditional channels to make multimillion-dollar payments, making it difficult for businesses to conduct international payments. Some well-known companies, such as SpaceX, have already used Cryptorails for this use case.
XB Accounts Receivable
Businesses with customers around the world often struggle to collect funds in a timely and efficient manner. They typically partner with multiple PSPs to collect funds locally, but they need a way to receive funds quickly, which can take days or even weeks depending on the country. Cryptorails is faster than SWIFT transfers and can compress the time to T+0.
Here is an example payment process for a Brazilian company purchasing goods from a German company:
The buyer sends Reais via PIX to the PSP.
The PSP converts Reais to USD and then to USDC.
The PSP sends USDC to the seller's wallet.
If the seller wants local fiat currency, the PSP will send USDC to a market maker or trading desk to convert it into local currency.
If the seller has a license/bank account, the PSP can remit funds to the seller through local channels; otherwise, it can use local partners.
Financial Operations
Companies can also use Cryptorails to improve financial operations and accelerate global expansion. They can hold dollars and use local on-ramps and off-ramps to reduce foreign exchange risk and enter new markets faster, even if local banking providers offer support. They can also use Cryptorails to restructure and repatriate funds between the countries in which they operate.
Foreign Aid Payments
Another common B2B use case is time-sensitive payments that Cryptorails can deliver faster to recipients. An example is foreign aid payments—allowing NGOs to use Cryptorails to remit funds to local exporters, who can then make individual payments to eligible individuals. This is particularly effective in economies with very poor financial systems and/or governments. For example, in South Sudan, where the central bank is collapsing and local payments can take over a month, as long as there is a mobile phone and internet connection, there is a way to bring digital currency into the country, and individuals can exchange digital currency for fiat currency and vice versa.
The payment process for this use case might look like this:
The NGO sends funds to the PSP.
The PSP sends a bank transfer to the OTC partner.
The OTC partner converts fiat currency to USDC and sends it to the local partner's wallet.
The local partner cashes out USDC through peer-to-peer (P2P) traders.
Payroll
From a consumer perspective, one of the most promising early adopters is freelancers and contractors, especially in emerging markets. The value proposition for these users is that more money ends up in their pockets rather than going to intermediaries, and this money can be in digital dollars. This use case also offers cost-effectiveness for businesses sending mass payments to the other party, particularly for crypto-native companies (such as exchanges) that already hold most of their funds in cryptocurrency.
The payment process for contractor payments typically looks like this:
The company undergoes KYB/KYC with the PSP.
The company sends dollars to the PSP or sends USDC to the wallet address bound to the contractor.
The contractor can decide whether to keep it as cryptocurrency or withdraw it to a bank account, and the PSP usually has master service agreements with one or more over-the-counter partners holding relevant licenses in their respective jurisdictions for local payments.
On-Ramps and Off-Ramps
On-ramps and off-ramps are a crowded market. Although many early attempts failed to scale, the market has matured over the past few years, with many companies operating sustainably and offering global local payment channels. While on-ramps and off-ramps can be used as standalone products (e.g., simply purchasing crypto assets), they are arguably the most critical part of the payment process for bundled services (such as payments).
Establishing on-ramps and off-ramps typically involves three components: obtaining necessary licenses (e.g., VASP, MTL, MSB), ensuring access to local bank partners or PSPs for local payment channels, and connecting with market makers or OTC desks for liquidity.
On-ramps were initially dominated by exchanges, but now an increasing number of liquidity providers (from smaller forex and OTC desks to large trading companies like Cumberland and FalconX) are offering on-ramp channels. These companies can typically handle up to $100 million in transaction volume per day and are unlikely to run out of liquidity for popular assets. Some teams may even prefer these channels because they can commit to spreads.
Due to licensing, liquidity, and orchestration complexities, non-U.S. off-ramps are usually much more difficult than U.S. on-ramps. This is especially true in Latin America and Africa, where there are dozens of currencies and payment methods. For example, you can use PDAX in the Philippines because it is the largest crypto exchange there, but in Kenya, you need to use multiple local partners such as Clixpesa, Fronbank, and Pritium depending on the payment method.
P2P channels rely on a network of "agents"—local individuals, mobile payment providers, and small businesses such as supermarkets and pharmacies—who provide fiat and stablecoin liquidity. These agents are particularly prevalent in Africa, where many people already operate mobile money stalls for services like MPesa, and their main motivation is economic incentives—earning money through transaction fees and foreign exchange spreads. In fact, for individuals in high-inflation economies like Venezuela and Nigeria, becoming an agent is more profitable than traditional service jobs such as taxi driving or food delivery. They can work from home using a mobile phone, typically requiring only a bank account and mobile payment to get started. The system is particularly powerful in its ability to support dozens of local payment methods without any formal licensing or integration because the transfers occur between individual bank accounts.
It is worth noting that P2P channels often offer more competitive foreign exchange rates. For example, the Central Bank of Khartoum in Sudan typically charges up to 25% for foreign exchange fees, while local crypto P2P channels offer rates of 8-9%, which is actually the market rate rather than the bank-imposed rate. Similarly, P2P on-ramp channels can offer foreign exchange rates about 7% lower than bank rates in Ghana and Venezuela. Generally speaking, in countries with a large supply of dollars, the spreads are smaller. Additionally, the best markets for P2P on-ramps are those with high inflation, widespread smartphone adoption, weak property rights, and unclear regulatory guidelines because financial institutions will not touch crypto, creating an environment for self-custody and P2P to thrive.
The payment process for P2P on-ramps might look like this:
The user selects or is automatically assigned a counterparty or "agent" who already has USDT, which is typically escrowed by the P2P platform.
The user sends fiat currency to the agent via a local channel.
The agent confirms receipt and sends USDT to the user.
From a market structure perspective, most on-ramps and off-ramps are commoditized, with low customer loyalty because they usually choose the cheapest option. To remain competitive, local channels may need to expand coverage, optimize for the most popular channels, and find the best local partners. In the long run, there may be consolidation in each country/region into a few on-ramp and off-ramp channels, each with comprehensive licensing, supporting all local payment methods, and offering the greatest liquidity. In the medium term, aggregators will be particularly useful because local providers are usually faster and cheaper, and combined options will generally offer the best pricing and completion rates for consumers.
From the consumer's perspective, the good news is that fees may trend towards zero. This is already seen on Coinbase today, where the cost of instant transfers from USD to USDC is $0. In the long run, most stablecoin issuers will likely offer this service to large wallets and fintech companies, further compressing fees.
Licensing
Licensing is a painful but necessary step to expand the adoption of Cryptorails. For startups, there are two approaches: partnering with licensed entities or obtaining licenses independently. Partnering with licensed entities allows startups to bypass the significant cost and lengthy time required to obtain their own licenses, but profit margins are reduced as most of the revenue goes to the licensed partner. Alternatively, startups can choose to invest upfront (potentially hundreds of thousands to millions of dollars) to obtain licenses independently. While this path usually takes months or even years (one project said it took 2 years), it enables startups to offer a more comprehensive product directly to users.
Although there are established strategies for obtaining licenses in many jurisdictions, achieving global licensing coverage is extremely challenging, if not impossible, because each region has its own unique money transfer regulations, and you would need over 100 licenses to achieve global coverage. For example, in the U.S. alone, a project would need to obtain a money transmitter license (MTL) in each state, a BitLicense in New York, and registration as a money services business (MSB) with the Financial Crimes Enforcement Network. Obtaining MTLs in all states can cost between $500,000 and $2 million and may take up to a year.
Challenges
Adoption of payment methods is usually difficult because it is a chicken-and-egg problem. You either need to get consumers to widely adopt a payment method, forcing merchants to accept it; or you need merchants to use a specific payment method, forcing consumers to adopt it. For example, before Uber became popular in 2012, credit cards were a niche market in Latin America; everyone wanted a credit card because it allowed them to use Uber, which was safer and (initially) cheaper than taxis. This created a virtuous cycle, with more people wanting credit cards because there were more cool apps that required them for payment.
This also applies to mainstream consumer adoption of Cryptorails. There hasn't been a use case where paying with stablecoins is particularly advantageous or completely necessary, although debit cards and remittance apps are closer. If P2P apps can unlock entirely new online behaviors, they also have a chance—micro-payments and creator payments seem like exciting candidates. This is generally true for consumer apps as well; if they don't offer a step-change improvement over the status quo, they won't be adopted.
In terms of on-ramps and off-ramps, there are still some issues:
High failure rates: If you've ever tried funding with a credit card, you'll understand.
User experience friction: While early adopters can tolerate the pain of accessing assets through exchanges, most people will likely use them directly within specific apps in the future. To support this, smooth in-app access is needed, preferably through Apple Pay.
High fees: Onboarding is still very expensive—fees can still be as high as 5-10% depending on the provider and region.
Quality inconsistency: Reliability and compliance still vary too much, especially for non-U.S. dollar currencies.
One issue that hasn't been deeply discussed is privacy. While privacy is not currently a significant concern for individuals or companies, it will become one once Cryptorails is adopted as a primary mechanism for business. When malicious actors start monitoring payment activities of individuals, companies, and governments through public keys, there will be serious negative consequences. A short-term solution to this problem is "privacy through obscurity," creating new wallets every time funds need to be sent or received on-chain.
Additionally, establishing banking relationships is often the most difficult part because it is another chicken-and-egg problem. If bank partners get transaction volume and make money, they will accept you, but you first need banks to get this transaction volume. Moreover, currently, only 4-6 small U.S. banks support crypto payment companies, several of which have reached their internal compliance limits. Part of the reason is that crypto payments are still classified as "high-risk activities" similar to marijuana and online gambling today.
The reason for this issue is that compliance is still not as robust as traditional payment companies. This includes AML/KYC and travel rule compliance, OFAC screening, cybersecurity policies, and consumer protection policies. More challenging is integrating compliance directly into Cryptorails rather than relying on external solutions and companies.
Outlook
On the consumer side, we are currently at a stage where certain groups are beginning to adopt stablecoins, especially freelancers, contractors, and remote workers. By leveraging card networks and offering consumers exposure to dollars and the ability to make everyday purchases, there is also a growing demand for dollars in emerging economies. In other words, debit cards and embedded wallets have become the "bridge" to bring crypto in a form that mainstream consumers intuitively understand to the chain. On the business side, we are at the beginning of mainstream adoption. Companies are using stablecoins at scale, and this will significantly increase over the next decade.
Based on this, here are 20 predictions for what the industry might look like in five years:
$200 billion to $500 billion in payments made via Cryptorails annually, driven primarily by B2B payments.
Over 30 new banks globally launching on Cryptorails.
Dozens of crypto companies being acquired as fintech firms rush to stay relevant.
Some crypto companies (likely stablecoin issuers) acquiring struggling fintech firms and banks that are trapped by high CAC and operational costs.
Approximately three crypto networks (L1 and L2) emerging and scaling, designed specifically for payments. These networks will be spiritually similar to Ripple but will have a sounder technology stack, economic model, and go-to-market approach.
80% of online merchants accepting cryptocurrencies as payment, either by expanding their products through existing PSPs or by offering a better experience through crypto-native payment processors.
Card networks expanding to cover around
