Podcast Summary: Bankless
Episode: How Crypto Neobanks Work: Frax, Cards, and Visa’s Role
Guest: Sam Kazemian (Founder, Frax)
Host: David Hoffman
Date: October 28, 2025
Overview
This episode dives deep into the evolving concept of crypto neobanks, their role in bridging traditional finance and DeFi, and the future of payments in a world of stablecoins. Sam Kazemian, founder of Frax, joins Bankless to discuss how stablecoins, crypto-native banking platforms, and even Visa’s current role all interact—and ultimately how neobanking and stablecoin adoption could phase out legacy payment rails entirely. Listeners gain an insider’s view of where the biggest battles in crypto-finance are now taking place and what to expect in the near future.
Key Discussion Points
1. What is a (Crypto) Neobank?
[01:16]
- Traditional Neobank: Fintech companies (like Mercury, Revolut) that offer a superior user experience by acting as a ‘wrapper’ over licensed banks; better than banks’ clunky apps and interfaces.
- “Neobanks are like this wrapper. They have better fintech applications, easier stuff...” — Sam Kazemian [01:23]
- Crypto Neobank: Extends the neobank concept to crypto and stablecoins. These platforms act as the bridge between on-chain assets and real-world spending, making it seamless to move value between traditional and crypto finance.
- “The essential thing to think about is basically how can these stablecoins get off chain and interact with the classical financial system and actually make it so that they're essentially one to one with digital cash.” — Sam Kazemian [03:55]
2. The Shift in Net Worth Location and User Needs
[00:00], [40:21]
- A generational and demographic shift: Increasing numbers of people (especially younger and crypto-native) have most of their net worth on-chain, not in banks.
- The challenge: Previously, people asked “Why would I bring my cash into stablecoins?” Now, the question is shifting to “Why would I bring my cash back to a bank?”
- “A lot of people now, especially younger people and crypto native people, most of their net worth is on chain… It’s a hassle to move it over to banks.” — Sam Kazemian [00:00]
- “As more and more people's net worth come on chain, the situation will reverse.” — Sam Kazemian [40:21]
3. Frax’s Approach: Pipes, Not Platform
[08:34], [09:10]
- Frax aims to be the backend “infrastructure pipes" for neobanks and card platforms, not the consumer-facing bank itself.
- They support others, like EtherFi or Pay, enabling their stablecoin (Frax USD) to power cards, bank integrations, and off/on ramps—without exclusivity or issuing their own cards.
- “We don't want to actually issue our own card or have a specific bank exclusivity or anything like that.” — Sam Kazemian [09:10]
4. Branded Stablecoins: Real Money or Gift Cards?
[05:49], [06:42]
- There’s a spectrum from “branded stablecoins” (Starbucks USD, considered programmable gift cards) to “real digital dollars” (USDC, USDT, Frax USD).
- The main competition is about winning payments and savings market share for “real money” stablecoins.
- “There’s going to be tons of stablecoins...the way that I like to think about it is that there’s essentially a long tail branded stablecoins closer to...gift cards...but the short tail...are playing for the money TAM, which is multi-trillion over the next five years.” — Sam Kazemian [06:42]
5. The “Genius” (US Regulatory) Standard & Interoperability
[02:39], [14:14]
- “Genius compatibility” refers to complying with new US legislation, creating standards for stablecoin backing and issuance.
- Frax USD: Backed by money market funds and RWAs (real-world assets) with qualified custodians (e.g., BlackRock, Fidelity), making it attractive to large institutions and future-proof for US regulation.
- Key innovation is interoperability: Frax wants to make it easy for any new branded stablecoin to use their infrastructure, creating one-to-one minting/redemption across multiple chains and banks.
- “If you can be interoperable with as many of these pipes as possible, that’s the real value for a new stablecoin coming into the industry.” — Sam Kazemian [10:33]
6. Cards as Coordination Layer: The Path to Merchant Acceptance
[22:37], [25:25]
- Most crypto cards today settle via existing rails (e.g., VisaNet), converting stablecoins for merchants who only want bank deposits.
- Short-term: Cards act as coordination tools—users and merchants interact with stablecoins invisibly.
- Long-term: As critical mass increases, merchants will start accepting stablecoins directly, enabling the network to “rip out” Visa (and legacy rails), keeping economic activity fully on-chain.
- “These cards essentially solve the coordination problem for eventually allowing people to do just peer to peer direct to merchant stablecoin payments.” — Sam Kazemian [22:37]
- “Once we have a critical mass of people paying with stablecoins we don’t need Visa anymore.” — David Hoffman [26:30]
- “That is exactly what I’m saying...[it] would be nearly impossible to do that before.” — Sam Kazemian [27:08]
7. The Proliferation and Competition of Stablecoin Chains
[28:28], [30:06]
- Multiple “stablecoin chains” are vying to become the payment standard (e.g., Plasma, Stable, Tempo, Fractal, Codex).
- Coordination challenge: Which one will dominate for payments (flows) vs. savings/issuance (stock)?
- Eth is ‘king’ for stock/savings, but alternative chains might win for low-latency, high-volume payments (flows).
- “I think chains like Ethereum will always, always win in terms of the stock or the TVL and the issuance...the flows are the volume of payments between everyone and so those kind of require different specialization…” — Sam Kazemian [30:37], [31:04]
8. Real-World Institutional Interest and Resilience
[33:17], [34:32]
- Institutional due diligence: Big US investment banks already exploring Frax USD for transactions and investments.
- Main concern: Security and uptime—Ethereum’s reliability is a key selling point.
- “It’s just much easier to be like, it’s on Ethereum the same way like Bitcoin and Ethereum just don’t have this problem.” — Sam Kazemian [33:17]
9. “Stock vs. Flow”: Payments Chains vs. Savings Chains
[32:23], [33:17]
- Stock (where funds are held) vs. Flow (where funds move). Ethereum dominates the former; payments chains may compete and gradually gain share over time.
10. Key Metrics: Money vs. Gift Cards
[43:35], [45:35]
- Winning metrics: Which stablecoins can be spent on cards AND deposited into banks as “real money” rather than just digital gift cards.
- Importance of velocity and utility: “Stablecoins move, not held”—payment coins have high velocity, savings coins (yield-bearing) are held.
- “Seeing which ones break through that barrier is...the winners in two to three years time.” — Sam Kazemian [42:39]
- “If you’re moving your stablecoin, they’re probably paying for stuff or they’re loading it in different places. Whereas if you’re holding a stablecoin usually it’s because it’s either yield bearing...or just used in DeFi…” — Sam Kazemian [45:24]
Memorable Quotes & Moments
-
On the inevitable stablecoin takeover:
“As more and more people's net worth come on chain, the situation will reverse. People will be like, why would I bring my cash back to a bank?” — Sam Kazemian [40:21] -
On Visa being a ‘middleman on borrowed time’:
“Once we have a critical mass...we can just start swapping the stablecoins directly rather than talking to Visa at all.” — David Hoffman [26:30] -
On stablecoins as programmable gift cards vs. real dollars:
“The main thing is: is it a stablecoin gift card or is it a real digital dollar?” — Sam Kazemian [07:41] -
On the need for two types of stablecoins (payment vs. savings):
“I actually now think [checking vs. saving accounts] is like a physical law of economics.” — Sam Kazemian [50:51] -
On metrics that matter:
“The important thing is the ones that are money will be in both the most important flows and the most important stocks, right, Held as cash. And so those are the unique aspects to look for.” — Sam Kazemian [45:05]
Notable Timestamps
- [00:00] – Net worth migration to on-chain assets, user pain points
- [01:16] – Defining neobanks in traditional and crypto contexts
- [05:49] – Strategy of platforms (Frax, Athena, EtherFi): pipes vs. fintech apps
- [14:14] – Genius compatibility & RWAs as collateral, infrastructure design
- [22:25] – Cashback on crypto cards vs. traditional card networks
- [25:25] – The path to removing Visa as a payments intermediary
- [28:28] – Explosion of stablecoin chains; potential for standards fragmentation
- [31:01] – Ethereum as “savings chain,” specialized payment chains emerging
- [33:17] – Institutional due diligence, real-life example; Ethereum trust
- [35:49] – Growth metrics and new phases for billions in stablecoin supply
- [37:33] – Difference between payments volume and DeFi volume (GDP impact)
- [40:21] – Sam’s “net worth theory” on where users keep their dollars
- [43:35] – What to look for as this ecosystem matures (real money vs. gift cards)
- [50:38] – Why true payments and savings stablecoins must remain separate
Final Thoughts
This episode shows the rapid evolution of crypto-native banking—from neobanks serving as bridges, to the coming era when stablecoins may totally displace bank accounts for both savings and payments. The backbone for this future: seamless stablecoin infrastructure, robust compliance, and broad institutional and merchant buy-in. As neobanks proliferate and stablecoins migrate to mainstream use cases, Visa and legacy systems may become just a fallback, not the default. The "bankless" future feels more possible than ever.
For further info and news on Frax or to connect with Sam Kazemian:
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