Why Ethena Is Moving Into Neobanking

Ethena enters neobanking: This week, stablecoin issuer Ethena launched Ethena Pay, its own crypto neobanking app. The product went live in 48 countries and combines a self-custodial stablecoin wallet with fiat banking rails. Its headline features include up to 6% rewards on dollar balances, up to 5% cashback on card purchases and free fiat onramps.

• Why it matters: The announcement comes as crypto neobanks are gaining significant traction, growing not only in number but also in size. The biggest names in the vertical, such as Ether.fi and KAST, are now processing more than $100 million in monthly card spend, growing 8x and 20x YoY, respectively.

Why the sector is taking off: Three structural advantages explain this growth:

• Global dollar accounts: Stablecoins allow crypto neobanks to offer dollar-denominated accounts in markets where access to traditional USD banking is limited or expensive. This is particularly powerful in emerging markets, where the alternative is often a weaker local currency.
• Maturing card infrastructure: Stablecoin card issuers such as Rain allow fintechs to launch card programs across countries in weeks, so stablecoin balances can be spent through existing card networks.
• Yield & rewards: By connecting users to DeFi infrastructure, crypto neobanks can offer access to yield opportunities that are difficult to reproduce through traditional banking rails. On top of that, many providers are using generous cashback programs, often ranging between 2% and 5%, to accelerate adoption.

A crowded market: But the same infrastructure that enables crypto neobanks to scale quickly also lowers the barrier to entry. Stablecoin wallets, card programs and DeFi integrations are increasingly available off the shelf, making it easier for new entrants or traditional neobanks with existing distribution to assemble the same feature set. As the stack becomes a commodity, differentiation depends on what a platform offers beyond it.

Vertical integration: For Ethena, that differentiation is USDe. USDe is already the fifth-largest USD stablecoin by market capitalization. By controlling USDe's backing revenue, Ethena captures more of the economics generated by balances in Ethena Pay, which gives it more room than platforms built on third-party stablecoins to fund rewards and absorb costs such as free onramps.

Owning the distribution: Ethena Pay also creates a new distribution channel for USDe. Money entering the app is converted into USDe, so growth in balances creates direct demand for the stablecoin. Until now, USDe has largely reached users through third parties such as Binance, Bybit and Aave; its own consumer product lets Ethena reach them directly and reduces its dependence on those partners.

• “If you never own the user and get one step closer to them, you can never control that economic relationship in a much more powerful way. We just don’t want to be in that position in three to five years where the distribution of our products is entirely reliant on other people,” Guy Young, founder and CEO of Ethena Labs, said on a recent podcast.

Geographic expansion: That direct distribution strategy is initially focused on Latin America, the Caribbean, Asia and Africa, with the U.S., EU and UK set to follow. How much of the product makes it into those markets will also depend on local stablecoin regulation. GENIUS and MiCA both prohibit issuers from paying yield on stablecoin balances, which puts the 6% rewards at the heart of Ethena Pay in question for U.S. and European users.

Outlook: Beyond expanding into new markets, Ethena plans to launch an enhanced USD savings product in the coming months, offering one-click access to higher-yielding DeFi strategies such as leveraged USDe looping. The stated near-term goal is to become one of the largest crypto neobanks by card spend and user balances.

• “Placing ourselves within the top three crypto-native providers of this product within the next six to nine months is what we’re wanting to hit,” Young added.

Alex Obchakevich is Research Partner and Advisor at Oobit, a global crypto payments platform.

Which markets and user groups are driving crypto-neobank adoption today, and how do usage patterns differ between them?

Growth is strongest in Latin America, India, Nigeria and Vietnam, essentially markets where high inflation or limited access to dollars creates stronger demand for alternatives to traditional banking. Looking at the users themselves, two groups stand out: crypto-native Gen Z users who are comfortable holding and spending digital assets, and freelancers who receive part of their income in stablecoins.

In emerging markets, crypto neobanks are already starting to resemble primary accounts. Users often fund them through international transfers or by buying USDT and spend directly from those balances. Usage patterns also vary across markets. In Latin America, groceries account for 35% of spending, followed by restaurants and fast food. In El Salvador, telecom captures 22% of spending, while in Vietnam hotels and lodging lead at 23%.

Developed markets look different. In the U.S., users also spend on everyday purchases, but groceries account for only 8% of transactions, while other forms of consumption make up the largest share at 41%. More importantly, users tend to spend crypto they already hold rather than regularly topping up these accounts with fiat.

Ondrej Pilny is Head of Growth at Gnosis, the organization behind Gnosis Pay, which launched one of the first stablecoin-enabled Visa cards and has since evolved into infrastructure for fintechs and wallets looking to launch their own branded crypto card programs.

What could drive broader crypto-neobank adoption in developed markets, and how do you see the competition between crypto-native neobanks, traditional neobanks and banks evolving?

In developed markets, cards alone probably are not enough. I think yield offerings are the next step and could become one of the strongest drivers of adoption among both crypto-native and mainstream users, turning these products from simple spending accounts into a combination of checking and savings.

Crypto-native neobanks may have an easier path to launching these products because they are already built around self-custodial wallets, making integrations with DeFi protocols more straightforward. Fintechs could follow, given their relative agility and need to keep pace. Traditional banks, however, face a harder transition. They generally prefer custodial setups, which are also central to their existing business models, and operate under tighter compliance constraints.

One bank I spoke with, for example, considered offering Aave yield to its customers but could not get comfortable with not knowing who was borrowing on the other side of the lending pool. Permissioned or KYC-gated markets could therefore become an important bridge, allowing banks to offer more innovative products while staying within their compliance requirements.

Competitive advantage through vertical integration
Illustration: Blockstories