Author: Dmitriy Berenzon

Compiled by: Felix, PANews

When Satoshi Nakamoto released the Bitcoin white paper in 2009, his vision was to use a cryptographic network for payments, allowing it to flow freely across the internet like information. While 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 witnessed a convergence of several significant innovations and developments that made 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 deposit and withdrawal channels worldwide, block space is faster and cheaper, embedded wallets simplify the user experience, and clearer regulatory frameworks reduce uncertainty.

Today, there is an excellent opportunity to build a new generation of payment companies that leverage "Cryptorails" to achieve significant economic advantages over traditional systems, which are burdened by multiple rent-seeking intermediaries and outdated infrastructure.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 around the clock and is essentially global.

This article will:

• Explain the key components of the traditional financial system
• Outline the main use cases of Cryptorails
• Discuss the challenges hindering continued adoption
• Share predictions for the market outlook five years from now

Notably, there are currently about 280 payment companies building on Cryptorails:

Source: Link

Existing Channels

To understand the importance of Cryptorails, it is essential first to 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 transactions have remained unchanged for the past 70 years. Essentially, card payments involve four main participants:

• Merchant
• Cardholder
• Issuing Bank
• Acquiring Bank

The first two are straightforward, but the latter two deserve explanation.

The issuing bank or issuer provides credit or debit cards to customers and authorizes transactions. When a transaction request is made, the issuing bank decides whether to approve it by checking the cardholder's account balance, available credit limit, and other factors. Credit cards essentially borrow funds from the issuing institution, while debit cards transfer directly from the customer's account.

If a merchant wants to accept credit card payments, they need an acquiring institution (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 institutions with issuing banks, provides clearing functions, establishes participation rules, and determines transaction fees. ISO 8583 remains the primary international standard that defines how payment information (such as authorization, settlement, and refunds) is constructed and exchanged between network participants. In the network environment, issuing institutions and acquiring institutions act like their distributors—issuing institutions are responsible for getting more cards into users' hands, while acquiring institutions are responsible for getting as many card terminals and payment gateways to merchants as possible so 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 to banks by Visa, and 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, handling all aspects of the transaction process—issuing their own cards, owning their own bank, and providing their 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 broader adoption but at the cost of control and revenue sharing among participants.

Source: Arvy

The economics of payments are complex, with multiple layers of fees in the network. Transaction fees are part of the payment fees charged by issuing banks for providing access to their customers. Although technically, acquiring banks pay transaction fees directly, the costs are often passed on to merchants. Card networks typically set transaction fees, which often account for a significant portion of the total payment cost. These fees vary widely by region and transaction type. 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%. Additionally, there are settlement fees paid to acquiring institutions, 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:

Source: 22nd

While not all participants will be introduced, several important ones need to be highlighted:

Payment gateways encrypt and transmit payment information, connecting to payment processors and acquiring institutions for authorization, and communicate transaction approvals or rejections to businesses in real-time.

Payment processors represent acquiring banks in processing payments. They forward transaction details from the gateway to the acquiring bank, which then communicates with the issuing bank through the card network for authorization. The processor receives the authorization response and sends it back to the gateway to complete the transaction. It also handles settlement, which is the process of funds actually entering 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 transfer of funds from the issuing bank to the merchant's account.

Payment facilitators (PayFac) or payment service providers (PSP) were first introduced by PayPal and Square around 2010, acting like a mini payment processor located between merchants and acquiring banks. They effectively serve as aggregators, bundling many smaller merchants into their systems to achieve economies of scale and simplifying operations by managing cash flow, processing transactions, and ensuring payments. PayFacs hold merchant IDs from card networks and assume compliance (e.g., anti-money laundering laws) and underwriting responsibilities on behalf of the merchants they work with.

Orchestration platforms are a middleware technology layer that simplifies and optimizes the payment process for merchants. They connect to multiple processors, gateways, and acquiring institutions through a single API, improving transaction success rates, reducing costs, and enhancing performance by routing payments based on factors like location or fees.

ACH

The Automated Clearing House (ACH) is one of the largest payment networks in the U.S., owned by the banks that use it. It was initially established in the 1970s but began to gain popularity when the U.S. government started using it to send Social Security payments, encouraging banks nationwide to join the network. Today, it is widely used for payroll, bill payments, and B2B transactions.

ACH transactions come in two main types: "push" payments (you send money) and "pull" payments (someone takes money with your permission). When you receive your salary via direct deposit or pay a bill online using your bank account, you are using the ACH network. The process involves multiple participants: the company or individual initiating the payment (originator), their bank (ODFI), the receiving bank (RDFI), and the operator acting 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, who subsequently forwards it to the RDFI. At the end of each day, the operator calculates the net settlement totals for its member banks (the Federal Reserve is responsible for managing the actual settlement).

Source: U.S. Payment Systems: A Guide for Payment Professionals

One of the most important things about ACH is how it handles risk. When a company initiates an ACH payment, its bank (ODFI) is responsible for ensuring everything is legitimate. This is especially important for pull payments—imagine if someone used your bank account information without permission. To prevent this, regulations allow disputes to be raised within 60 days of receiving a statement, and 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 launched "Same Day ACH," allowing for faster payment processing. Nevertheless, 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 available 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, guaranteed payments that require immediate settlement, such as securities transactions, significant commercial deals, and real estate purchases. Once executed, wire transfers are typically irreversible and cannot be canceled or revoked without the recipient's consent. Unlike conventional payment networks that process transactions in batches, modern wire systems use real-time gross settlement (RTGS), meaning each transaction is settled individually as it occurs. This is a crucial feature, as the systems handle hundreds of billions of dollars daily, and the risk of bank failures during the day is too high when using traditional net settlement.

Fedwire is an RTGS transfer system that allows participating financial institutions to send and receive same-day funds transfers. When a business initiates a wire transfer, its bank verifies the request, debits the account, and sends a message to Fedwire. The Federal Reserve Bank then immediately debits the funds from the remitting bank's account and credits the recipient bank's account, which subsequently deposits the funds into the final recipient's account. The system operates on business days from 9 PM the previous day to 7 PM Eastern Time, and is closed on weekends and holidays.

CHIPS is owned by large U.S. banks through a clearinghouse and serves a smaller number of major banks. Unlike Fedwire's RTGS approach, CHIPS is a net settlement engine, meaning the system allows for the aggregation of multiple payments between the same parties. For example, if Alice wants to send Bob $10 million, and Bob wants to send Alice $2 million, CHIPS would consolidate these amounts into a single payment of $8 million from Alice to Bob. While this means CHIPS payments take longer than real-time transactions, most payments are still settled within the same 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 information, much of which initiates payment transactions through various networks. According to Statrys, SWIFT transfers take about 18 hours to complete.

In a general process, the sender of funds instructs their bank to send a wire transfer to the recipient. The value chain below illustrates a simple case where both banks belong to the same wire transfer network.

Source: U.S. Payment Systems: A Guide for Payment Professionals

In more complex cases, especially for cross-border payments, transactions need to be executed through correspondent banking relationships, often using SWIFT to coordinate payments.

Source: Matt Brown

Use Cases

With a basic understanding of traditional channels, the advantages of Cryptorails are outlined below.

Cryptorails are most effective in situations where the use of traditional dollars is restricted but demand for dollars is high. Think of places where people want dollars to preserve value but cannot easily obtain traditional dollar bank accounts. These countries are often economically unstable, have high inflation, currency controls, or underdeveloped banking systems, such as Argentina, Venezuela, Nigeria, Turkey, and Ukraine. Additionally, compared to most other currencies, the dollar is a superior store of value, and consumers and businesses often prefer dollars because they can easily use them as a medium of exchange or convert them into local fiat currency at the point of sale.

The advantages of Cryptorails are also most evident in the context of global payments, as the crypto network knows no borders. They rely on the existing internet to provide global coverage. According to World Bank data, there are currently 92 RTGS (real-time gross settlement) systems operating worldwide, each typically owned by their respective central banks. While they are well-suited for sending domestic payments within these countries, the problem is that they cannot "intercommunicate." Cryptorails can act as a glue between these different systems and can extend to countries without these systems.

Cryptorails are also best suited for payments that have a certain urgency or typically have a higher time preference. This includes cross-border vendor payments and foreign aid payments. They are particularly helpful in channels where correspondent banking networks are inefficient. For example, despite geographical proximity, sending money from Mexico to the U.S. is actually more difficult than sending it from Hong Kong to the U.S. Even in developed countries like the U.S. to Europe, payments often go through four or more correspondent banks.

On the other hand, for domestic transactions in developed countries, the appeal of Cryptorails is lower, especially in places with high card usage or where real-time payment systems already exist. For instance, internal payments in Europe proceed smoothly through SEPA, and the stability of the euro eliminates the need for dollar-denominated alternatives.

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 a payment method from customers. While this is one of the oldest use cases, historically, it has not seen much transaction volume, as few people hold cryptocurrencies, even fewer want to spend them, and for those who do hold cryptocurrencies, useful options are limited. The market is different today, as more people hold crypto assets, including stablecoins, and an increasing number of merchants accept them as payment options, as it allows them to reach new customer segments and ultimately sell more goods and services.

From a geographical perspective, most transaction volume comes from businesses selling products to consumers in countries that are early adopters of cryptocurrencies, typically emerging markets like Vietnam and India. From the merchant's perspective, most demand comes from online gambling and retail brokerage firms that want to reach users in emerging markets, Web2 and Web3 markets (such as watch suppliers and content creators), and gaming (such as fantasy sports and lotteries).

The "front-end" merchant acceptance process typically looks like this:

• PSP usually creates a wallet for the merchant after KYC/KYB.
• Users send cryptocurrencies to the PSP (payment service provider).
• The PSP converts the cryptocurrency into 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 barrier to continued adoption of this use case is psychological challenges, as cryptocurrencies seem "unreal" to many. There are two main user roles that need to be addressed: one that does not consider its value at all and wants to keep everything as magical internet money, and another that is pragmatic and directly deposits funds into a bank.

Additionally, in the U.S., consumer adoption of cryptocurrencies is more challenging because credit cards effectively pay consumers 1-5% cash back on purchases. There have been attempts to persuade merchants to promote cryptocurrency payments directly to consumers as an alternative to credit cards, but so far, these efforts have not been successful. The Merchant Customer Exchange launched in 2012 and failed in 2016 due to its inability to kickstart consumer adoption. In other words, getting users to switch from card payments to using crypto assets is difficult for merchants to incentivize directly, as payments are already "free" for consumers, so the value proposition should first be addressed at the consumer level.

On the back end, Cryptorails can provide merchants with faster settlement times and access to funds. Settlements with Visa and Mastercard can take 2-3 days, American Express may take 5 days, and international settlements can take even longer, such as around 30 days in Brazil. In certain 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 deposit funds via credit cards, transfer funds on-chain, and have them directly deposited into the merchant's bank account in local currency. With less capital tied up during the transfer process, this liquidity not only improves working capital, but merchants can also further enhance cash management by freely and instantly exchanging between digital dollars and yield-bearing assets (such as tokenized U.S. Treasuries).

Specifically, the "back-end" merchant acceptance process may look like this:

• Customers enter card information to complete the transaction.
• The PSP creates a wallet for the customer, who funds it 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 choose to transfer funds to the merchant's bank account via native channels T+0 (i.e., on the same day).
• The PSP typically receives funds from the acquiring bank on T+1 or T+2 (i.e., within 1-2 days).

Debit Cards

The ability to link debit cards directly to non-custodial smart contract wallets establishes a powerful bridge between the blockchain space and the real world, driving organic adoption among different user roles. In emerging markets, these cards are becoming the primary consumer tool, increasingly replacing traditional banking. Interestingly, even in countries with stable currencies, consumers are gradually using these cards to accumulate dollar savings while avoiding foreign exchange fees at the time of purchase. High-net-worth individuals are also increasingly using these crypto-linked debit cards as an effective tool for spending USDC globally.

The appeal of debit cards over credit cards comes from two factors: debit cards face fewer regulatory restrictions (e.g., MCC 6051 is completely rejected in capital-controlled countries like Pakistan and Bangladesh), and they have lower fraud risk, as settled crypto transactions do not pose serious liability issues for credit cards.

In the long run, cards linked to crypto wallets used for mobile payments may actually be the best way to combat fraud, as mobile devices have biometric verification: scan your face, make a purchase, and recharge your wallet from your bank account.

Remittances

Remittances refer to the transfer of funds from individuals who have moved abroad for work back to their home country. According to World Bank data, the total remittance amount in 2023 is approximately $656 billion, equivalent to Belgium's GDP.

Traditional remittance systems are costly. On average, the fees for cross-border remittances amount to 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). Bank fees are often the highest, around 12%, while average charges from remittance operators (MTOs) like MoneyGram are about 5.5%.

Source: World Bank

Cryptorails can provide a faster and cheaper way to remit funds. The development of companies using Cryptorails largely depends on the broader remittance market size, with the largest 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 significant factor driving this development is non-custodial embedded wallets like Privy, which offer users a Web2-level user experience.

The process of remitting funds using Cryptorails may look like this:

• The sender accesses the PSP via a bank account, debit card, credit card, or directly to a blockchain 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, which can be exchanged directly or through market makers or OTC partners.
• The PSP directly pays the fiat currency into the recipient's bank account or through a local payment gateway; alternatively, the PSP can first generate a non-custodial wallet for the recipient to receive funds, allowing them to choose to keep it on-chain.
• In many cases, the recipient must complete KYC before receiving the funds.

That said, the path to launching crypto remittance projects remains challenging. One issue is the need to incentivize people to switch from MTOs (remittance operators), which can be costly. Another issue is that most transfers on Web2 payment applications are already free, so local transfers alone are insufficient to overcome the network effects of existing applications. Finally, while on-chain transfer components work well, they still need to interact with TradFi (traditional finance) at the "edges," which may encounter the same or even worse issues due to costs and friction. In particular, payment gateways that convert to local fiat currency and pay through methods like mobile phones 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 reported it took them 2.5 months to send vendor payments from Africa to Asia. For example, cross-border payments from Ghana to Nigeria (two neighboring countries) can take weeks and incur transfer fees of up to 10%.

Additionally, cross-border settlements are both slow and expensive for PSPs. For companies like Stripe that facilitate payments, it may take up to a week to pay international merchants, and they must lock up capital to mitigate fraud and refund risks. Shortening conversion cycles would free up significant working capital.

Cryptorails has gained significant traction in B2B XB payments, primarily because merchants are more concerned about costs than consumers. Reducing transaction costs by 0.5-1% may not sound like much, but it becomes substantial when transaction volumes are high, especially for low-margin businesses. Speed is also crucial. Completing payments within hours rather than days or weeks has a significant impact on a company's working capital. Moreover, businesses are more tolerant of poorer user experiences and more complex processes compared to consumers who expect a smooth experience.

At the same time, the cross-border payment market is vast—estimates from different sources vary widely, but according to McKinsey data, the revenue of the cross-border payment market was approximately $240 billion in 2022, with transaction volumes around $150 trillion. That said, establishing a sustainable business remains challenging. While the "stablecoin sandwich"—converting local currency to stablecoin and back—certainly speeds things up, it is also costly, as foreign exchange conversions on both sides erode profits. Some companies have attempted to address this by establishing internal market-making departments, but this is capital-intensive and difficult to scale. Additionally, clients are concerned about regulation and risk, requiring extensive education. However, as stablecoin legislation opens the door for more businesses to hold and use digital dollars, foreign exchange costs may rapidly decline over the next two years. With more inflow and outflow channels and token issuers having direct banking relationships, they will be able to effectively offer wholesale foreign exchange rates at internet scale.

XB Vendor Payments

For B2B payments, most cross-border transactions revolve around vendor 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 local channels in these countries are underdeveloped, making it difficult for companies to access them due to a lack of local banking partners. Cryptorails can also help alleviate pain points in specific countries. For example, in Brazil, you cannot use traditional channels to pay millions of dollars, making international payments challenging for businesses. Some well-known companies, such as SpaceX, have already used Cryptorails in this use case.

XB Accounts Receivable

Businesses with customers around the world often struggle to collect funds in a timely and effective manner. They typically work with multiple PSPs to collect funds locally but need a fast way to receive funds, which can take days or even weeks depending on the country. Cryptorails is faster than SWIFT transfers, compressing 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 to the PSP via PIX.

• The PSP converts Reais to USD, then to USDC.

• The PSP sends USDC to the seller's wallet.

• If the seller wants local fiat currency, the PSP sends USDC to a market maker or OTC to convert it to local currency.

• If the seller has a license/bank account, the PSP can remit funds to the seller through local channels; if not, they 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 inflow and outflow to reduce foreign exchange risk and enter new markets faster, even if local banking providers support them. 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, where Cryptorails can be used to reach recipients faster. One example is foreign aid payments—allowing NGOs to use Cryptorails to send money to local export agents, who can then make payments to eligible individuals. This is especially effective in economies where the local financial system and/or government is very poor. For instance, in countries like South Sudan, where the central bank is collapsing, local payments may take over a month. However, as long as there is a mobile phone and internet connection, there are ways to bring digital currency into the country, allowing individuals to exchange digital currency for fiat and vice versa.

The payment process for this use case may 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 withdraws USDC through peer-to-peer (P2P) traders.

Payroll

From the 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 ultimately ends up in their pockets rather than flowing to intermediaries, and this money can be in digital dollars. This use case also brings cost efficiency for businesses sending large-scale payments to the other party, particularly for crypto-native companies (like 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 a wallet address linked to the contractor.
• The contractor can decide whether to keep it as cryptocurrency or withdraw it to a bank account, and the PSP typically has some master service agreements with one or more OTC partners holding relevant licenses in their respective jurisdictions for local payments.

Inflow and Outflow

Inflow and outflow is a crowded market. While many early attempts failed to scale, the market has matured over the past few years, with many companies operating sustainably and providing global local payment channels. While inflow and outflow can be used as standalone products (such as simply purchasing crypto assets), it can be argued that it is the most critical part of the payment process as a bundled service (like payments).

Establishing inflow and outflow channels typically involves three components: obtaining the necessary licenses (e.g., VASP, MTL, MSB), ensuring access to local payment channels through local banking partners or PSPs, and connecting with market makers or OTC desks for liquidity.

Deposits were initially dominated by exchanges, but increasingly, more liquidity providers—from smaller forex and OTC desks to larger trading firms like Cumberland and FalconX—are offering deposit channels. These companies can typically handle transaction volumes of up to $100 million per day, making it unlikely for them to exhaust the liquidity of popular assets. Some teams may even prefer these channels because they can promise spreads.

Due to licensing, liquidity, and orchestration complexities, non-U.S. withdrawal channels are generally much more difficult than U.S. deposit channels. 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, as it is the largest cryptocurrency exchange there, but in Kenya, you need to use several local partners like 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 like supermarkets and pharmacies—that provide liquidity for fiat currency and stablecoins. These agents are particularly common in Africa, where many have operated mobile money stalls for services like MPesa, motivated primarily by economic incentives—earning through transaction fees and foreign exchange spreads. In fact, for individuals in high-inflation economies like Venezuela and Nigeria, becoming an agent can be more profitable than traditional service jobs like taxi driving or food delivery. They can also work from home using their mobile phones, typically requiring just a bank account and mobile payment to get started. The strength of this system lies in its ability to support dozens of local payment methods without any formal licensing or integration, as transfers occur between personal bank accounts.

It is worth noting that the foreign exchange rates in P2P channels are often more competitive. For example, banks in Khartoum, Sudan, typically charge up to 25% in foreign exchange fees, while local crypto P2P channels offer rates of 8-9%, which are effectively market rates rather than the rates imposed by banks. Similarly, P2P deposit channels can provide foreign exchange rates about 7% lower than those of banks in Ghana and Venezuela. Generally, in countries with a larger supply of dollars, the spreads are smaller. Furthermore, the best markets for P2P deposits are those with high inflation, high smartphone penetration, weak property rights, and unclear regulatory standards, as financial institutions do not engage with cryptocurrencies, creating an environment conducive to self-custody and P2P growth.

The payment process for P2P deposits may look as follows:

• Users can choose or automatically designate a counterparty or "agent" that already holds USDT, which is typically hosted by the P2P platform.
• Users send fiat currency to the agent through local channels.
• The agent confirms receipt and sends USDT to the user.

From a market structure perspective, most inflows and outflows are commoditized, with low customer loyalty, as they typically choose the cheapest option. To remain competitive, local channels may need to expand their coverage, optimize for the most popular channels, and find the best local partners. In the long term, we may see each country consolidate into a few inflow and outflow channels, each with comprehensive licensing, supporting all local payment methods, and providing maximum liquidity. In the medium term, aggregators will be particularly useful, as local providers are often faster and cheaper, while bundled options typically offer consumers the best pricing and completion rates.

From a consumer perspective, the good news is that fees may trend toward zero. This has already been seen on Coinbase, where the cost of instant transfers from USD to USDC is $0. In the long run, most stablecoin issuers may 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 already licensed entities or obtaining a license independently. Partnering with licensed partners allows startups to bypass the significant costs and lengthy time required to obtain a license themselves, but it reduces profit margins as most revenue flows to the licensed partner. Alternatively, startups can choose to invest upfront (potentially hundreds of thousands to millions of dollars) to obtain a license independently. While this route often takes months or even years (one project reported it took them 2 years), it enables startups to offer a more comprehensive product directly to users.

While there are established strategies for obtaining licenses in many jurisdictions, achieving global licensing coverage is extremely challenging, if not impossible, as each region has its own unique regulations for fund transfers, requiring over 100 licenses for global coverage. For example, in the U.S. alone, a project needs to obtain a money transmission license (MTL) for each state, a BitLicense for New York, and register as a money services business (MSB) with the Financial Crimes Enforcement Network. Obtaining all state MTLs alone can cost between $500,000 and $2 million and may take up to a year.

Challenges

The adoption of payment methods is often difficult due to the chicken-and-egg problem. You either get consumers to widely adopt a payment method, forcing merchants to accept it; or you get 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 led to the popularity of other on-demand applications like Rappi, as people now had smartphones and credit cards. This created a virtuous cycle where more people wanted a credit card because there were more cool applications that required credit cards for payment.

This also applies to mainstream consumer adoption of Cryptorails. There have not yet been use cases where paying with stablecoins is particularly advantageous or entirely necessary, although debit cards and remittance applications are closer. If P2P applications can unlock new online behaviors, then they also have a chance—micro-payments and creator payments seem to be exciting candidates. This is generally true for consumer applications; without incremental improvements to the status quo, these applications will not be adopted.

In terms of inflows and outflows, there are still some issues:

• High failure rates: If you have tried to deposit using a credit card, you will understand.
• User experience friction: While early adopters may tolerate the pain of accessing assets through exchanges, most early users may prefer to use specific applications directly. Smooth in-app access is needed to support this, preferably through Apple Pay.
• High fees: Access remains very expensive—fees can still be as high as 5-10%, depending on the provider and region.
• Quality inconsistency: There are still significant disparities in reliability and compliance, especially with non-dollar currencies.

One under-discussed issue is privacy. While privacy is not currently a serious concern for individuals or companies, it will become an issue once Cryptorails is adopted as a primary mechanism for business. When malicious actors begin to monitor the payment activities of individuals, companies, and governments through public keys, serious negative consequences will arise. One way to address this issue in the short term is to "protect privacy through obfuscation," initiating a new wallet each time funds need to be sent or received on-chain.

Additionally, establishing banking relationships is often the most challenging part, as it presents another chicken-and-egg problem. If banking partners see transaction volume and profit, they will accept you, but you first need banks to generate that transaction volume. Moreover, currently, only 4-6 small U.S. banks support crypto payment companies, and some of these banks have reached their internal compliance limits. Part of the reason is that today's crypto payments are still classified as "high-risk activities," similar to cannabis and online gambling.

The reason for this issue is that compliance is still not on par with traditional payment companies. This includes compliance with AML/KYC and travel rules, OFAC screening, cybersecurity policies, and consumer protection policies. More challenging is directly integrating compliance into Cryptorails rather than relying on external solutions and companies.

Outlook

From a consumer perspective, we are currently at a stage where certain demographics are beginning to accept stablecoins, particularly freelancers, contractors, and remote workers. By leveraging card networks and providing consumers with dollar exposure and everyday spending capabilities, we are also getting closer to the demand for dollars in emerging economies. In other words, debit cards and embedded wallets have become the "bridge" to bring cryptocurrencies to mainstream consumers in an intuitive form off-chain. In the business realm, we are at the early stages of mainstream adoption. Companies are using stablecoins at scale and will significantly increase their usage over the next decade.

Based on this, here are 20 predictions for what the industry may look like in five years:

• The amount paid through Cryptorails each year will be between $200 billion and $500 billion, primarily driven by B2B payments.
• More than 30 new banks will launch on Cryptorails globally.
• As fintech companies compete to remain relevant, dozens of crypto companies will be acquired.
• Some crypto companies (possibly stablecoin issuers) will acquire struggling fintech companies and banks that are facing challenges due to high CAC and operational costs.
• About three crypto networks (L1 and L2) will emerge and scale, designed specifically for payments. Such networks will be conceptually similar to Ripple but will have a reasonable tech stack, economic model, and listing approach.
• 80% of online merchants will accept cryptocurrencies as a payment method, either by expanding their product offerings through existing PSPs or by providing a better experience through crypto-native payment processors.
• Card networks will expand to cover approximately 240 countries and regions (currently around 210), using stablecoins as a last-mile solution.
• The majority of transaction volume from over 15 global remittance channels will be conducted through Cryptorails.
• On-chain privacy will eventually be adopted, driven by businesses and nations using Cryptorails (rather than consumers).
• 10% of all foreign aid expenditures will be sent through Cryptorails.
• The market structure for inflows and outflows will solidify, with 2-3 suppliers in each country/region capturing most of the transaction volume and partnerships.
• The number of P2P inflow and outflow liquidity providers will be as numerous as food delivery workers. As transaction volumes increase, agents will become economically sustainable jobs and continue to offer foreign exchange rates at least 5-10% cheaper than bank quotes.
• Over 10 million remote workers, freelancers, and contractors will receive service payments through Cryptorails (paid directly in stablecoins or local currencies).
• 99% of AI agency commerce (including agent-to-agent, agent-to-person, and person-to-agent) will occur on-chain through Cryptorails.
• More than 25 well-known partner banks in the U.S. will support companies operating on Cryptorails.
• Financial institutions will attempt to issue their own stablecoins to facilitate global real-time settlement.
• Independent "crypto Venmo" applications will still not be popular, as user roles remain too niche, but large messaging platforms like Telegram will integrate Cryptorails for P2P payments and remittances.
• Loan and credit companies will begin to collect and pay through Cryptorails to improve their working capital, as less capital is tied up during transfers.
• Some non-dollar stablecoins will begin large-scale tokenization, giving rise to an on-chain foreign exchange market.
• Due to government bureaucracy, CBDCs will remain in experimental stages and have not yet reached commercial scale.

Conclusion

As Patrick Collison suggested, Cryptorails are the superconductors of payments, forming the foundation of a parallel financial system that offers faster settlement times, lower fees, and the ability to operate seamlessly across borders. This idea has taken a decade to mature, but today we see hundreds of companies working to make it a reality. In the next decade, we will see Cryptorails become the core of financial innovation, driving global economic growth.

Related reading: 20,000-word research report on crypto payments: From electronic cash, tokenized currency, to the future of PayFi

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