The United States is the most developed market for crypto, so why is there no U-card craze?

Dec 31, 2025 16:40:12

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The United States is home to top global cryptocurrency platforms like Coinbase, Kraken, and Gemini, with a gradually clarified regulatory framework and deep participation from institutional investors.

Logically, the U-card should be the main battlefield in the U.S.

But the reality is quite the opposite: there is almost no U-card craze in the U.S. The Coinbase Card requires complete KYC and is essentially a compliant cryptocurrency debit card. The model in Asia where "you can use it just by buying a U-card" is hardly seen in the U.S. market.

Why? The answer to this question reveals the core essence of the U-card industry and foreshadows what will happen in this industry by 2026.

### 1. The Harsh Truth: U-cards Are Not a Revolution, But a Patch

Three Reasons the U.S. Doesn't Need U-cards

Reason 1: The Traditional Payment System is Too Perfect

Americans:

Everyone has a credit card, with 2-5% cash back
Apple Pay and Zelle are widely available
Bank accounts are easy to open
The dollar is a global currency, with no barriers to cross-border consumption

Additional Costs of Using Crypto for Payments:

Each transaction is a taxable event (must report taxes)
Buying coffee with USDT = must report capital gain/loss to the IRS
Spending 100 times a year? You need to fill out 100 lines of Form 8949

The Average American's Reaction:

"Why would I want to add this hassle? My credit card gives me cash back."

Reason 2: Strict Regulations, Banks Are Reluctant to Take Risks

The logic of issuing cards in the U.S.:

Must cooperate with licensed banks
Banks are strictly regulated by OCC and FinCEN
KYC/AML requirements are extremely high
Banks fear fines and are unwilling to deeply bind with crypto

Result: The Coinbase Card is a fully compliant product, not a "gray area" U-card.

Reason 3: Tax Issues Make Crypto Consumption Impractical

This is the most fatal:

Every crypto transaction requires calculating capital gain/loss
Must report taxes at the end of the year
Too cumbersome for ordinary people

Compare this to markets where U-cards are truly booming:

Common Characteristics:

Financial systems are imperfect OR
Capital controls are strict OR
Excluded from the international financial system

The Harsh Truth:

U-cards are not a "more efficient payment method," but a "patch when the financial system fails."

They exist not because of a technological revolution, but because traditional finance doesn't work in certain places.

The U.S. financial system is perfect → no need for patches → no U-card craze.

This reveals the essence of U-cards: they are a transitional product, not the endgame.

### 2. Core Insight: U-cards Are a Tool, Not a Business

The Overlooked New Demographic

In the past 20 years, a new group of "new humans" has emerged globally:

Who are they?

Cross-border freelancers (taking orders on Upwork, Fiverr)
Digital nomads (working remotely in Thailand, Bali)
Small cross-border merchants (Shopify, Etsy sellers)
Workers in emerging markets (Latin America, Africa, Southeast Asia)
Web3 practitioners and contractors

Their Characteristics:

Income is globalized: USDT, Payoneer, cross-border transfers
Consumption is localized: need to spend local currency
Traditional banks do not serve them: hard to open accounts, troublesome KYC, high fees, slow transfers

This is a group overlooked by traditional finance.

U-cards are not a business, but a tool.

They allow financial institutions to "touch" these new demographics that traditional finance cannot reach.

But the question is:

If you just "issue a card" to them, what can you gain?

The Ceiling of Relying Solely on Card Issuance

Current Revenue Models of Most U-card Companies:

Card issuance fee: $50-100
Top-up fee: 1-3%
Transaction fee: 1-2%
Withdrawal fee: 2-5%

Let's do the math:

Assuming you have 1 million users:

Each user transacts $10,000 per year
Your overall fee rate is 2%
Annual revenue = $200M

Sounds good?

But:

Channel costs: 50-60%
Compliance costs: 10-15%
Operational costs: 15-20%
Net profit = $20-40M

More critically:

One-time revenue is primary

You earn once when a user opens a card
After that, you can only rely on transaction fees
No sustainability

Easily replaceable

Card issuance thresholds are getting lower
More competitors are emerging
Users have no loyalty and can switch cards anytime

No pricing power

Market competition is fierce
Fees can only be pushed down
No differentiation

Clear ceiling

The number of users you can serve is limited (1-3 million high-frequency users)
Low value per user ($10-50/year)
LTV (lifetime value) is too low

A truth told to me by an investor:

"We know U-cards are a timing product, and their real uses are often related to gray demands. But by 2026, the gap will widen—companies that survive will not be making money just by 'issuing cards.'"

This statement reveals the core:

If you are just a "card issuer," you have already lost.

### 3. The Watershed of 2026: Who Can Provide Complete Financial Services

From "Card Issuer" to "Financial Service Provider"

Let's see why RedotPay has been able to emerge.

Many people think it succeeded because "the card is well made."

Wrong.

What RedotPay is really doing is becoming a financial service provider for these new demographics.

What is "Financial Service"?

Take an example: a freelancer from the Philippines

He receives $2,000 USDT monthly on Upwork and needs to live in Manila.

What can traditional U-card companies provide?

Give him a card
He tops up USDT
He spends
End of service

You earn from him:

Card issuance fee $10
Transaction fee 1% × $2,000 = $20/month
Annual revenue: $10 + $240 = $250

What does RedotPay provide?

Income Stage

He receives USDT on Upwork
Transfers it to his RedotPay account via P2P or directly
Multiple deposit methods, low cost
You earn: Top-up fee 0.5% = $10/month

Storage Stage

His USDT is stored in the RedotPay account
Can see multi-currency balances (USDT, PHP, USD)
Functions like a "digital wallet"
You earn: Exchange rate spreads, possible account management fees

Consumption Stage

He uses the card to spend PHP locally
The system automatically converts USDT to PHP
Exchange rates are transparent
You earn: Transaction fee 1% = $20/month

Withdrawal Stage

He needs to send money home
Using the payout function, USDT is directly converted to PHP and sent to a Philippine bank
Cheaper and faster than Western Union
You earn: Withdrawal fee 2% = $40/month

Value-Added Stage (Future)

His idle money can be placed in stablecoin investments
Annualized 3-5%
You earn: Management fees

Recurring Revenue

Next month he gets new orders
Continues to use your services
Cycle repeats

You earn from the same user:

Top-up $10 + Spending $20 + Withdrawal $40 = $70/month
Annual revenue: $840

Comparison:

Traditional card issuers earn $250/year from him
RedotPay earns $840/year from him
LTV increases 3.4 times

On the Reality of This LTV Model

You might ask: Can we really achieve $840/year?

Honest answer: This is a theoretical cap, not the median in reality.

Real-World Deductions

To achieve an LTV of $840/year, you need:

Users to treat you as their Primary Account

Reality: Most users will use 2-3 platforms simultaneously
You may only capture 50% of their transaction volume
Deduction: 50%

Compliance costs should not eat into profits

To provide full-chain services, you need MTL/EMI licenses (each country $50K-$500K)
Need a compliance team (annual cost $500K+)
Regular audits required
Deduction: 20-30% profit margin

Users will not churn

Reality: The annual churn rate for U-card users is 30-50%
This means your LTV will be discounted
Deduction: 30-50%

Operational costs are controllable

Customer service, risk control, technical maintenance
These will eat into profits
Deduction: 15-20%

Let's Do a Realistic Calculation

Theoretical LTV: $840/year

After various deductions:

$840 × 50% (transaction share) = $420
$420 × 70% (net profit margin after compliance) = $294
$294 × 60% (after accounting for churn) = $176
$176 × 80% (after accounting for operations) = $141/year

Compared to the traditional issuer's $250/year?

Wait, this result is actually lower?

Why Transform?

Key Differences:

Traditional issuers' $250/year

No stickiness
Easily replaceable
If regulations tighten, it could drop to zero
Purely C-end, cannot scale

Financial service providers' $141/year (C-end)

Has stickiness (users' money is with you)
Not easily replaceable
Strong resistance to regulatory tightening
Most importantly: Can penetrate B2B

The Real Opportunity: B2B

This is the key.

B2B scenarios include:

Expense Control for Web3 Companies

DAOs, protocols, foundations need to manage global contractor expenses
Traditional corporate cards do not support crypto
Need U-cards + expense control SaaS
LTV per client: $5,000-20,000/year

Payouts for Marketplaces

Shopify, Etsy, freelancer platforms
Need to pay global sellers/contractors
U-card's payout function is a necessity
LTV per client: $10,000-50,000/year

Fund Management for Cross-Border Enterprises

Chinese companies going global
Need to collect, pay, and exchange in multiple countries
U-cards + account systems are the optimal solution
LTV per client: $3,000-15,000/year

Therefore, the correct path for transformation is:

To penetrate B2B with "financial service" capabilities, rather than continuing to compete in the C-end.

This is what RedotPay is truly doing—its growth does not come from C-end retail users, but from B-end clients.

Key Insight:

C-end: Each function adds 10-30% to LTV
B-end: A complete service chain is table stakes; the real competition is in industry depth and service quality

Counterexample: Why Some Companies Fail in Transformation

Case Study: The Transformation Journey of an Asian U-card Company (Anonymous)

In Q2 2023, this company decided to transform:

500,000 monthly active users
Decided to add multi-currency accounts
Added payout functionality
Added stablecoin investment options

Investment:

Expansion of the tech team (+15 people)
Building a compliance team (+8 people)
Applying for MTL licenses in four countries
Budget: $2.5M

Six months later (Q4 2023):

The sponsor bank threatened to shut down the BIN, citing "too complex business"
Compliance costs actually amounted to $4.2M (68% over budget)
The tech team's development progress was severely delayed (40% completion)
The core ledger system had serious bugs
After new features launched, the risk control system had a misjudgment rate of over 30%
User complaints surged, and the customer service system collapsed

Twelve months later (Q2 2024):

Had to cut 80% of new features
Returned to pure card issuance business
Team morale was low, and core members left (CTO, compliance head)
Missed the best window of opportunity
Total loss: $6M+

Fundamental Reasons for Failure:

Underestimated Technical Difficulty

Thought "adding features" was just API integration
Actually needed to restructure the entire system architecture
Core Ledger System was a completely new field
Risk control systems could not keep up (from single scenario to multiple scenarios)
Teams without fintech genes could not handle this complexity

Underestimated Sponsor Bank's Conservativeness

Thought banks would support innovation
In reality, banks only want to do simple business
Once your business becomes complex, banks want to drop you
No Plan B (backup banking channel)

Underestimated Compliance Costs

Budgeted $2.5M, actual $4.2M (still unfinished)
MTL applications in each country took 6-12 months longer than expected
The labor cost of the compliance team is twice that of the tech team
Ongoing compliance costs (audits, reports) were not accounted for

Attempted Too Many Transformations at Once

Wanted to do the entire chain at once
Ended up not doing anything well
Technical debt accumulated
User experience worsened

Lessons Learned:

Transformation is not something you can just "decide to do"; it requires carefully designed phased execution. Many companies do not fail due to wrong direction but due to uncontrolled execution. Especially: If you do not have the technical genes of the payment industry, do not easily touch core banking system-level restructuring.

The Biggest Variable in 2026: Sponsor Banks Are "De-risking"

Many people think the difficulty of transformation lies in "Can I fill the capability gap?"

Wrong.

The biggest variable in 2026 is whether your upstream sponsor bank will shut down your BIN.

Earthquake in the U.S. BaaS Industry

In 2024-2025, the U.S. BaaS (Banking-as-a-Service) industry experienced a series of earthquakes:

Synapse Bankruptcy Case (May 2024)

Synapse is an intermediary layer connecting FinTech and banks
Provides banking APIs and fund management for hundreds of FinTechs
After bankruptcy, involved funds exceeded $265M+
End users' money was frozen and inaccessible
Triggered regulatory scrutiny of the entire BaaS model

Sponsor Banks Tightening Standards (Late 2024 - 2025)

Evolve Bank & Trust: Tightened cooperation standards, suspended most new projects, and re-evaluated existing projects
Metropolitan Commercial Bank (MCB): Suspended new projects and required existing clients to simplify their business models
Blue Ridge Bank: Exited the BaaS business
Sutton Bank: Significantly raised cooperation thresholds

Regulatory Actions

OCC (Office of the Comptroller of the Currency) issued "Third-Party Risk Management" guidelines
FDIC strengthened inspections of sponsor banks
Several banks received regulatory warnings or fines
Core requirement: Banks must be responsible for the business of partner FinTechs

Why?

Regulators found that many banks did not understand their partners' businesses
Risk control responsibilities were unclear: Who is responsible when something goes wrong?
Banks discovered that complex FinTech projects carried too high risks with disproportionate returns
Once something goes wrong, banks bear primary responsibility and fines

Data:

In 2023, about 50 banks in the U.S. provided BaaS services
By 2025, fewer than 30 were actively providing services
Expected in 2026: <20 banks

Result:

Many companies attempting to transform into "full-chain services" did not fail due to insufficient capabilities but because their upstream banks shut down their BINs.

Impact on the U-card Industry

Direct Impacts:

Sponsor Banks Prefer "Simple Business"

Pure card issuance: acceptable
Adding multi-currency accounts: requires additional scrutiny
Adding payout: likely to be rejected
Adding investment: basically impossible

Due Diligence Standards Have Increased Significantly

Previously: Just provide a business plan
Now: Requires detailed compliance manuals, risk control processes, technical architecture, financial audits
Previously: 3 months to launch
Now: 6-12 months, and still not guaranteed approval

Many Existing BINs Have Been Shut Down

Banks require "business simplification"
If not achievable, cooperation is terminated
You get 3-6 months to find a new channel
Can't find one? Business halts

The Harsh Paradox:

Transforming into a "financial service provider" is the correct strategic direction
But this is precisely the direction that sponsor banks are least willing to support
You want to transform, but the banks won't let you.

Case Study: A U-card Company's Real Experience

In Q3 2024, began developing payout functionality
In Q4 2024, the sponsor bank requested a detailed risk control plan
In Q1 2025, the bank demanded the removal of the payout feature, citing "too complex business"
Choice: Either abandon the transformation or find a new bank
Result: Spent 6 months finding a new bank, during which business growth stagnated
Cost: Missed the window of opportunity and was surpassed by competitors

What Does This Mean?

In 2026, companies that survive must meet two conditions:

Have the capability to provide complete financial services (business model level)
Have the ability to manage sponsor banks or bypass them (resource capability level)

The second point is often more difficult and more critical.

How to Bypass or Respond?

Strategy 1: Hold Your Own Banking License

Cost: $5M-$20M+
Time: 2-3 years
Suitable for: Large players
Case: Some leading crypto exchanges are doing this

Strategy 2: Find a Sponsor Bank Willing to Support Complex Business

Becoming increasingly rare
Costs are rising
Requires strong industry resources and relationships
Must demonstrate strong risk control capabilities

Strategy 3: Shift to Infrastructure in Non-U.S. Markets

Hong Kong: MSO (Money Service Operator)
Singapore: MPI (Major Payment Institution)
Europe: EMI (Electronic Money Institution)
Costs are relatively low, but each market requires reapplication

Strategy 4: Find Non-Bank Channels

Visa/MC Direct (extremely difficult)
Payment Facilitator model
High costs, but not constrained by a single sponsor bank

This is also why RedotPay has been laying out from day one:

Hong Kong MSO
Singapore entity
Multiple sponsor bank relationships
Rather than relying entirely on the U.S. BaaS system

This is not "icing on the cake," but "a matter of life and death."

Insights for Practitioners

If you are currently entirely dependent on the U.S. BaaS system for card issuance:

You need to immediately assess: Will your sponsor bank shut you down in 2026?
Assessment Criteria:
Is your business "simple"? (just issuing cards = relatively safe)
Is your business "complex"? (multi-currency accounts, payouts = high risk)
Can your risk control capabilities reassure the bank?
Do you have a Plan B? (backup banking channel)

If you are planning to transform into a "financial service provider":

While designing your business model, you must simultaneously consider:
Which sponsor bank will support me?
How many backup channels do I need?
Should I shift to non-U.S. infrastructure?
Does my technical architecture support rapid channel switching?

This is not a question of "whether to do it," but "whether I can find bank support."

In 2026, among the companies that fail, at least half will not fail due to errors in business models, but because "the sponsor bank stopped supporting them."

The Harsh Differentiation in 2026

Based on the above analysis, U-card companies in 2026 will differentiate into three categories:

First Category: Already Dead (40-50%)

Characteristics:

Only issue cards
Depend on a single sponsor bank
Low user LTV (<$100/year)
Revenue relies on gray demands
No B2B capabilities
Accumulated technical debt, unable to transform

Causes of Death:

Sponsor bank shuts down BIN
Regulatory tightening, gray business shrinks
User churn, unable to acquire customers
Cash flow breaks

Second Category: Barely Surviving (30-40%)

Characteristics:

Found a vertical scenario (specific country, specific industry)
Simple business, banks can still accept
Some stickiness, but clear ceiling
Cannot grow large, but also won't die

Future:

Small but beautiful
Potential acquisition targets
Or become channel partners for larger platforms

Third Category: Winning (10-20%)

Characteristics:

Provide complete financial services
Successfully penetrate B2B scenarios
Have multiple sponsor banks or own infrastructure
High LTV ($200-$500/year for C-end, $2,000+/year for B-end)
Strong technical genes (can handle core banking-level systems)
Strong compliance capabilities (can cope with multi-country regulations)

Future:

Become financial service providers for "new demographics"
Valuation of $500M-$5B
Possible IPO or strategic acquisition

What category will your company fall into?

This is not a simple binary judgment. The real situation is much more complex:

What does your revenue structure look like?
How sticky is your user base?
What complete services can you provide?
How deep is your reliance on gray demands?
How many sponsor bank relationships do you have?
Can your technical team handle system reconstruction?
Can your compliance capabilities cope with multi-country regulations?
How much time do you have left for transformation?

The answers to these questions will determine your company's survival in 2026.

The Other Side of "Value"

We must honestly face a question:

Supporting gray and black markets is also a form of "value."

Why do some U-card companies grow rapidly?

Not because their products are good
But because they serve "needs that others dare not serve"

These needs include:

Avoiding capital controls
Gray fund flows
Gambling payments
Certain gray e-commerce

This is indeed "value"—value for specific users.

But the problem is:

Unsustainable

Regulations will eventually tighten
China has already cracked down on virtual cards
Other countries will follow suit

Extremely risky

Could be investigated at any time
Channels may be shut down
Licenses may be revoked
Sponsor banks will be the first to drop you

No brand

Cannot publicly state
Cannot do PR
Cannot raise funds (legitimate institutions won't invest)
Cannot attract top talent

Limited ceiling

Cannot scale
Cannot go public
Cannot operate long-term
Cannot establish a competitive moat

More importantly:

One of the core reasons for the tightening of sponsor banks in 2024-2025 is the discovery that too many FinTechs are engaging in "gray area" businesses. Serving gray demands not only harms yourself but also harms the entire industry.

Therefore:

If your "financial services" primarily serve gray and black markets, you are earning a "risk premium," not a "capability premium." What will matter in 2026 is whether you can provide compliant and sustainable financial services.